Trump’s “One Big Beautiful Bill” and the Rise of Pass-Through Millionaires

The legislation passed by the House last year, dubbed the One Big Beautiful Bill Act (OBBBA), combines a tax cut exceeding $5 trillion with reductions of more than $1 trillion from food-stamp and Medicaid programs. A central provision creates a permanent 20 percent deduction for income earned through “pass-through” businesses—entities whose profits are taxed at the owners’ individual rates rather than at the corporate level.

The Guardian

Pass-through structures encompass roughly 95 percent of U.S. businesses, employ half of the workforce, and generate over half of total business income. Economists Owen Zidar (Princeton) and Eric Zwick (University of Chicago) estimate that for every billionaire on the Forbes 400 list there are more than 4,000 “Main Street” millionaires with net worth of at least $10 million; collectively these individuals hold about $46.7 trillion in assets. The deduction lowers the top marginal tax rate for owners of such firms to 29.6 percent, compared with 37 percent for wage earners.

The Guardian

The 20 percent pass-through deduction is projected to cost the federal budget $820 billion over a ten-year horizon—nearly the same amount trimmed from Medicaid. Data from the Urban-Brookings Tax Policy Center show that 57 percent of the $1.3 trillion pass-through income reported in 2022 flowed to the richest 1 percent of the population, roughly 890,000 individuals. A Treasury-Federal Reserve-Dartmouth study found that 35 percent of the total deductions following the 2017 tax cut, amounting to $54 billion, went to taxpayers earning at least $1 million annually.

The Guardian

Senator Ron Johnson, who once opposed the 2017 tax reform, later supported a similar deduction after the Senate raised the pass-through deduction from 17 percent to 20 percent, citing his “affinity for these owner-operated pass-throughs.”

The Guardian

• “I just have it in my heart a real affinity for these owner-operated pass-throughs,” — Mike Johnson

The Guardian

The analysis underscores that while the legislation is presented as a boost for Main Street enterprises, the bulk of its fiscal benefits accrue to a narrow segment of affluent owners, raising questions about its broader economic equity.

The Guardian