Congressional tax plan would hurt low-income families

Low-income American families would see their annual incomes shrink the most under congressional proposals to pay for tax cuts by cutting Medicaid and the Supplemental Nutrition Assistance Program, according to a new analysis from the Urban Institute, supported by the Robert Wood Johnson Foundation.

Medicaid provides affordable health coverage to approximately 79 million people, and SNAP helps approximately 42 million people nationwide obtain nutritious foods for themselves and their families.

Researchers analyzed the combined effect of potential policy changes currently being discussed in Congress to (a) extend tax cuts originally put in place in 2017 that are set to expire at the end of the year and (b) cut funding to both the Medicaid and SNAP programs over the next decade.

The analysis shows that all income groups making less than $30,000 per year would be worse off, on average, but families with the lowest incomes—those making less than $10,000 per year—would lose the most from these combined policies, facing a nearly 15% cut in income after taxes and government benefits (more than $2,700 in 2026).

Meanwhile, high-income families would see substantial increases in annual income. For example, families earning more than $200,000 would, on average, gain more than $13,000 next year from the policies under consideration.

The tax cuts alone would disproportionately benefit wealthy families, the analysis shows. Average savings from extending tax cuts would net just $20 for families with incomes below $10,000, compared to more than $80,000 for families with incomes above $1 million.

“Our analysis shows the benefits of these combined policies would be concentrated in families with higher incomes, while the lowest-income families would suffer significant losses in net income,” said Jessica Banthin, senior fellow at the Urban Institute.

“Congress is seeking to play the role of a reverse Robin Hood by raiding the safety net to finance tax cuts for the wealthy,” said Avenel Joseph, interim executive vice president of RWJF. “Medicaid and SNAP are critical lifelines that allow millions of people to care for themselves and their families and live their healthiest lives. Gutting these vital programs in favor of regressive tax policies will harm health and weaken local economies."

Read the full analysis, “Who Gains and Who Loses under a Tax Cut Extension with Medicaid and SNAP Spending Reductions.”