By Stacy M. Brown NNPA Newswire Senior National Correspondent
President Donald Trump’s new tax law is now in force, and as the 2026 filing season begins, economists say the damage is not theoretical. It is already written into the tax code. The legislation locks in and expands Trump’s 2017 overhaul while layering on new provisions that funnel wealth upward, raise taxes on millions of low-income Americans, and deepen racial inequities that have defined the U.S. economy for generations.
“This massive tax-and-spending package does more to transfer wealth upward than any other single piece of legislation in decades while penalizing lower-income Americans and cutting public benefits,” the Institute on Taxation and Economic Policy said in its analysis of the law.
According to ITEP, the poorest 40 percent of Americans will pay more in taxes under the new law, while the middle fifth receives only marginal relief. The richest 1 percent, however, will take home more benefits than the bottom 80 percent combined in 2026. The racial divide is stark. High-income households are disproportionately white, while Black and Latino families are far more likely to be concentrated in income groups that lose ground.
At the center of the imbalance is the expanded pass-through business deduction, increased from 20 percent to 23 percent. Treasury Department data show that nearly all of the $1 trillion in tax cuts generated by this provision over the next decade will flow to the top 1 percent. Hispanic taxpayers, who account for 15 percent of the population, receive about 5 percent of the benefit. Black taxpayers, 11 percent of the population, receive roughly 2 percent.
The law also sharply weakens the estate tax by permanently raising the exemption to $15 million for individuals and $30 million for married couples, indexed to inflation. Economists say the change all but eliminates the tax for ultra-wealthy families while locking in racial disparities tied to inherited wealth. White families are about three times as likely as Black families to receive an inheritance, and the median inheritance for White families is roughly 25 percent higher.
Supporters of the law point to larger tax refunds expected this year as proof that working Americans are benefiting. The Tax Foundation estimates individual income taxes were reduced by $129 billion for 2025, with as much as $100 billion likely to be paid out through higher refunds during the 2026 filing season. Average refunds could rise by several hundred dollars, and in some cases close to $1,000.
But analysts say those refunds are largely the result of delayed withholding adjustments, not sustained gains in wages or financial security. Many low-income filers, particularly those with little or no tax liability, receive little to nothing. ITEP said provisions marketed as help for working families continue to bypass the poorest households, many of them Black.
The child tax credit was raised to $2,200 per child, yet it remains only partially refundable and far below its 2021 level. Millions of very low-income families are still excluded. Census data show that nearly one in five Black and American Indian people lived below the poverty line in 2024, placing them among those least likely to see any benefit.
The law offsets tax cuts at the top by reducing funding for health care, food assistance, and other programs relied upon by working families. Economists warn that the long-term costs will fall heaviest on younger Americans. Millennials and Gen Z, the most racially diverse generations in U.S. history, will inherit higher deficits and fewer public resources.
The Internal Revenue Service began accepting 2025 returns on Jan. 26 and expects to process roughly 164 million filings this year.
New deductions for overtime, tips, auto loan interest, and seniors are now available, though many phase out well before reaching higher income levels. Analysts note that administrative readiness does not change who ultimately wins and loses under the law.
ITEP said Congress had options that would have protected working families without deepening inequality, including limiting tax extensions to households earning under $400,000 and restoring the expanded child tax credit. That approach would have delivered larger tax cuts to the bottom 60 percent of Americans at a fraction of the cost.
“This law harms the economic well-being of poor and working families of all races, especially people of color,” ITEP said. “The new tax and spending law doesn’t meet the basic test of fairness, and it falls tremendously short.”
