Trump Won the Election: How His Tax Plan Could Affect the Upper Middle Class
Written by
Andrew Lisa
Edited by
Amber Barkley
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Much has been written about how President-elect Donald Trump’s tax policies might affect the rich, the poor and the middle class — but what about those in the upper middle class who are doing better than most, but haven’t quite yet broken through and become wealthy?
Deep dives from two prominent tax policy analysis organizations — one that leans center-right and one that leans center-left — conclude that Trump’s proposed tariffs on imported goods will outweigh any gains the upper middle class might have realized from his proposed tax cuts.
What Is the Upper Middle Class?
According to a USA Today analysis, the upper middle class is a loosely defined socio-economic bracket between average and wealthy, populated mostly by educated professionals with income levels in the top 15% to 20% of households.
According to the Institute on Taxation and Economic Policy (ITEP), a center-left non-profit, nonpartisan think tank that analyzes state and federal tax policy issues, that’s those households earning roughly between $94,100 and $360,000.
The Upper Middle Class Isn’t Quite Upper Enough
According to the ITEP, Trump has proposed tax policy changes that, on average, would give a tax cut to the richest 5% of Americans and a tax increase for all other income groups — including even the upper crust of the upper middle class, which just misses out on most of the benefits.
ITEP data shows that if his primary proposals went into effect in 2026, the richest 1% would receive an average tax cut of about $36,300 and the next richest 4% would get $7,200.
The upper middle class, on the other hand, would see their taxes rise by between $610 and $1,790, depending on whether they’re closer to the median or the aristocracy on the income spectrum.
Big Tax Cuts and Bigger Tariffs
According to the ITEP and the Tax Foundation, a center-right international tax policy nonprofit, Trump has proposed the following major changes.
- Extending the temporary provisions from his 2017 Tax Cuts and Jobs Act (TCJA), which are set to expire at the end of 2025, although Trump has said he won’t extend the $10,000 cap on state and local tax (SALT) deductions.
- Making certain types of income tax-exempt, including Social Security benefits, tips and overtime pay.
- Reducing the corporate tax rate from 21% to 20%, or to 15% for companies that make their products in the U.S.
- Repealing Biden-era green energy incentives and other Inflation Reduction Act (IRA) tax credits.
- Imposing a 60% tariff on goods from China and a 20% tariff on all other imported goods.
Organizations like Americans for Tax Fairness, the Center on Budget and Policy Priorities and the Economic Policy Institute have long concluded that the TCJA favored the rich and would do so again if made permanent, as Trump proposes. Therefore, it’s logical that many of its provisions would also favor the upper middle class — but not enough to offset what the Tax Foundation and ITEP agree will be the high cost of tariffs.
Tax Breaks Won’t Offset the Rising Price of Imports
Tariffs are taxes that foreign producers and suppliers pass onto domestic buyers, increasing the price of imports for U.S. consumers and overseas-sourced raw materials for domestic manufacturers.
“Tariffs will increase costs on everyone, including the middle class,” said Kevin Jerry, a nationally recognized expert in tax method changes who specializes in cost segregation, tangible property regulations and revenue recognition changes. “They are an outdated method of collecting tax and, most of the time, only hurt all consumers because the tariff cost is added to the importer’s cost and then passed on to the customer.”
The Tax Foundation’s analysis found that, thanks to tariffs, upper middle-class households in the 80th to 90th income percentile will have 0.9% less post-tax income after the first year. Wealthier households in the 90th to 95th income percentile will lose 1.2%.
Here’s how it breaks down, according to the ITEP’s research.
60th to 80th Income Percentile: $94,100 – $157,500
- TCJA extensions: -$1,600
- Exempting certain income types: -$1,790
- Corporate rate reductions: -$50
- Green and IRA credit repeals: +$160
- Tariffs: +$5,070
Total tax change: +$1,790
80th to 95th Income Percentile: $157,500 – $360,000
- TCJA extensions: -$3,610
- Exempting certain income types: -$3,420
- Corporate rate reductions: -$150
- Green and IRA credit repeals: +$390
- Tariffs: +$7,400
Total tax change: +$610
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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