In making these tax cuts permanent, the distribution of benefits will also change. About $300,000 is the threshold where net new 2025 tax breaks start. Only 4% of businesses generate $250,000 or more per year. So while we’ll keep our exemptions, most of us will be paying more taxes than we do now.

If you’re new to understanding tax brackets, here’s a good explainer. Effectively, you pay a blended rate of all the tiers in which you earned. Once you get to $626,000 of AGI, you pay the top rate of 37% on every dollar after that. That rate applies to less than 2% of Americans. And it’s historically low, down from as much as 70% in the early 80s. 

Don’t get me wrong, I’m all for you getting there. I want you to have your health and financial security. It’s my job to help people make the kind of money from their businesses that could land them in the top tax bracket, and to use smart tax strategies with what they take home. What I want to clarify is that, for most of you, this bill will make you feel like you are paying a higher percentage of taxes at lower levels of earning—because you will be.

Beyond our individual impacts, I find the big picture of these tax bills to be problematic. For Team TL;DR:

• There will be business-owner tax perks, but small businesses will lose the benefits of many federal programs and direct spending.
• The House bill uses accounting tricks to hide the fact the upper-income tax breaks are funded with deficit borrowing.
• The Congressional Budget Office (CBO) has confirmed that these bills, as written,  cannot work without cutting some combination of Social Security, Medicare, or Medicaid. 

The current administration has proposed $4.5 trillion in tax cuts over the next five years. The 2017 cuts would become permanent, and additional cuts would be made. It proposed to pay for the bill with $2 trillion in savings from a smaller federal government, tariffs, new taxes, and faster economic growth. 

Federal budget: It’s very hard to cut the $7 trillion federal budget by $2 trillion. Federal employee salaries are less than 5% of the federal budget, about $336 billion. That would be firing everybody. The IRS is our accounts receivable department. Firing them means collecting less money. And blanket DOGE cuts have impacted other revenue-generating programs like low-income home loans and national parks. 

Tariffs: I covered tariffs last week. Utterly stupid. I dub it “How to lose an economy in ten days.” Now we’re doubling down on Canadian steel and aluminum. You pay them, whether directly as a business owner or indirectly as a consumer.  

New taxes: The lowest and middle income tax brackets will be set at higher rates. You’ll be paying those, too.

Entitlements: The GOP has said Social Security, Medicare, and Medicaid won’t be touched. The CBO has said that’s impossible under the current bill.  

The math doesn’t math on spending reductions and new revenue.

On growth, we now engage in magical thinking. The bill assumes GDP will grow at 2.5% instead of 1.8%. While that seems like a small amount, T47 has tanked GDP to the tune of -5% in the past six weeks. Tariffs mean less economic activity, which means GDP contraction. (You can monitor the weekly GDPNow report here.) 

So we can’t get there with fuzzy math and magical thinking. What’s left? Accounting tricks. The CBO is being asked to apply an accounting treatment called “current policy baseline” that will hide the deficit spending. I mentioned that the 2017 tax cuts were considered temporary. But GOP lawmakers are asking that they be considered current policy, since they’re in force. Temporary spending is counted toward the deficit. Ongoing spending is not. On paper, this makes it look like tax cuts aren’t coming from borrowing. Here’s a good explainer.  

Now we’re lying to appease the debt hawks, who are already mad that we owe $36 trillion and related interest, largely from borrowing in the last 25 years, including the 2017 tax cuts we’ve already received. The US Treasury provides this interactive chart. 

And, going back to the top, most of the new tax cuts benefit the wealthiest among us. A recent study from Wharton showed the bottom 80% of income earners would get 29% of the total value,  the top 10% would get 56% of the value. Our deficit would increase by $5.1 trillion over five years.

So, why are we proposing to borrow money to let the wealthiest among us keep more of what they have? Kids, you’re going to be asked again this week to revisit Ferris Bueller’s Day Off and more 1980s economics. There’s a theory that if business owners keep more money, we create more jobs. This is called—anyone? anyone?— trickle-down or voodoo economics. Small-business owners are good at the voodoo. Ask employees of Walmart and Amazon, owned by three of the world’s top 10 wealthiest people, how the trickling is going.

The concentration of wealth among the world’s 24 superbillionaires is already the GDP of France. And we have a campaign funding system that lets very wealthy people spend as much as they want to back candidates. They’re popping into Mar-a-lago for $5 million dinner reservations to get these tax incentives.

So that’s what comes with QBI. A few of us will be allowed to play in the zone of financial comfort. While that 20% passthrough is great, factor the impact of these other changes into whether or not this is good for you: 

• If your income is less than $300,000 per year, your net income tax rate will go up.
• If you’re receiving a personal or small business ACA subsidy for health insurance, it will likely be less or nothing in 2026.
• If you have federal student loans, your repayment terms will be more aggressive. When Income-Driven Repayment (IDR) plans resume, your payment will be at least $200 more per month. (ICYMI, as of February 27, SAVE is dead and the IDR portal offline. The president has also signed an executive order to reduce eligibility for Public Service Loan Forgiveness (PSLF).
• If you own or plan to buy real estate, you will likely get even more incentives.
• If you receive SNAP or Medicaid (or state-paid health insurance), your benefits will be less or go away unless your state increases its spending.
• You might be able to deduct more of your state and local taxes. The SALT tax cap of $10,000 is being revisited. This would close the S-corp SALT loophole, but it only exists because of the cap.
• The corporate tax rate may be significantly lower, 12-15%, which may create incentive for highly profitable passthrough entities to elect C-corp status.
• If you want to pass ownership of your small business to someone else, you should be able to do that largely tax-free, with estate tax preserved at $14 million or higher.
• If this bill passes, I begrudgingly agree with Team Manosphere: get your bag in the next four years because US taxpayers will be paying back a paralyzing amount of interest from 2029. 

I’m not excited that I’ll have to earn more to stay in the same place, while our national economic position gets worse, so we can transfer wealth to people who already have more money than they could spend in a lifetime.

So what can you do?

• Use this email to have an informed conversation with your tax accountant or CFO to drive your personal and business tax strategy.
• Keep an eye on the tax bill debate and related CBO analysis, which is expected between now and May in the Ways and Means Committee.  
• Call your Congressional representatives. You can also schedule time to meet with them in person or at a town hall.
• Start planning now. Perhaps you’d like to increase your personal compensation, change your tax structure, or just be more informed about how your business works and contributes to your financial stability. Luckily, you know somebody who does this. Schedule a Strategy Session with me.