**
The recent enactment of Donald Trump’s One Big Beautiful Bill Act (OBBBA) has reignited the debate over tax fairness in the United States. This sweeping legislation, which combines a massive tax cut exceeding $5 trillion with over $1 trillion in cuts to essential programmes like food stamps and Medicaid, has drawn criticism for disproportionately benefitting the wealthiest Americans. While House Speaker Mike Johnson asserts that these tax reductions are aimed at “small business owners,” scrutiny reveals a different narrative—one that serves the interests of millionaires and billionaires alike.
The Myth of the Small Business Owner
In the aftermath of the House’s approval of the OBBBA last year, Johnson proclaimed that the bill was not about enriching millionaires but rather about empowering small business owners who create jobs in communities across the nation. This assertion promotes a comforting image of the hardworking entrepreneur, yet it obscures the reality that the current tax structure is significantly skewed in favour of the affluent.
Approximately 95% of businesses in the US are classified as “pass-through” entities, which means their profits are taxed at the individual level rather than the corporate rate. This arrangement effectively allows owners to sidestep the corporate income tax, resulting in substantial savings. As a consequence, the majority of the tax benefits flow to those already at the top of the income ladder, particularly the wealthiest individuals.
The Consequences of Pass-Through Taxation
The 2017 Tax Cuts and Jobs Act, advocated by Republicans, included provisions specifically benefiting pass-through businesses. Senator Ron Johnson from Wisconsin, for instance, initially hesitated to support the act until he secured an increase in the tax deduction for pass-through income from 17% to 20%. This deduction, now a permanent fixture of the tax code following the OBBBA, is projected to cost the federal budget about $820 billion over the next decade, nearly matching the reductions made to Medicaid funding.
Recent statistics underscore the disproportionate advantage enjoyed by the wealthiest Americans. Data from the Urban-Brookings Tax Policy Center indicates that in 2022, 57% of all pass-through income was allocated to just 890,000 individuals within the top 1% of earners. A collaborative study by economists from the Department of the Treasury, the Federal Reserve Bank of Minneapolis, and Dartmouth University revealed that 35% of the deductions claimed in the year following the 2017 tax cuts—amounting to a staggering $54 billion—benefitted those earning at least $1 million annually.
The Political Power of the Wealthy
Both Johnson and Trump are well aware of the implications of these tax policies. Johnson himself has personal ties to the pass-through system, having sold a stake in his own business for millions, while Speaker Johnson resides in a $3.7 million townhouse owned by a wealthy Republican donor. This interconnectedness raises questions about the motivations behind tax legislation that seemingly favours the interests of a select few.
Economists Owen Zidar from Princeton and Eric Zwick from the University of Chicago are set to publish research shedding light on the influence of “everywhere millionaires”—those affluent individuals who may not be billionaires but still wield considerable power in the political landscape. These millionaires, including dentists, car dealers, and real estate developers, now outnumber billionaires by an astonishing ratio of 4,000 to one. Collectively, their wealth totals approximately $46.7 trillion, dwarfing that of the richest individuals on the Forbes list.
The Broader Implications for Society
While the focus of political discourse often centres on billionaires, it’s the Main Street millionaires who may exert greater influence over policy decisions. The benefits they receive from tax breaks, such as the pass-through deduction, impact not only their financial standing but also broader societal structures. For example, the limitations placed on the number of residency positions funded by Medicare—championed by medical professionals—have led to a shortage of doctors in the US, contributing to health care disparities when compared to other OECD countries.
Additionally, these millionaires benefit from various regulations that protect their interests, including franchise laws that limit competition for car dealerships and monopolistic practices among real estate agents. Such arrangements not only entrench wealth but also hinder economic mobility for those outside the privileged circles.
Why it Matters
The passage of the One Big Beautiful Bill Act highlights a troubling trend in US tax policy: the prioritisation of the wealthy at the expense of essential social services. As the wealth gap continues to widen, it becomes increasingly crucial to scrutinise the mechanisms that allow affluent individuals to thrive while ordinary Americans struggle. The implications of such policies extend far beyond financial statistics; they shape the very fabric of society, influencing access to healthcare, education, and opportunities for advancement. In a democracy, where equity and fairness should reign supreme, it is imperative that the voices of millions are heard over the interests of a privileged few.
