Why people who earn less in California will get smaller tax breaks from the Trump plan
California’s lowest income taxpayers are likely to see a much smaller tax break than most middle and upper income people from the Trump administration’s Big Beautiful Bill, according to a new analysis.
That group, which has family incomes of less than $31,000, comprises the lowest 20% of California income earners. Their tax bills are poised to go up because the bill did not extend healthcare credits used by lower income people to better afford coverage.
The credits, enacted in 2021 as part of a COVID relief package, are due to expire at the end of this year.
Californians with incomes of less than $31,000 could pay $100 less next year in taxes, which is 0.6% of this year’s net income. Those earning $31,000 to $59,600 would also get a small break, an average of $720, or 1.6% of net income.
Those who earn more than $59,600 in California will see an average tax reduction of about $1,650 next year, amounting to about 2% of net income, according to the study by the Institute on Taxation and Economic Policy, a progressive Washington research group.
The megabill was signed into law July 4 by President Donald Trump after passing Congress with only Republican votes. Democrats continue to assert it is tilted to giving bigger breaks to wealthy people and will cost an estimated $3.4 trillion over the next 10 years.
Republicans see the bill as providing a series of tax breaks that will boost the economy.
“This package delivers a lot of what we’ve been pushing for years. It means more jobs and a stronger economy,” said Rep. Doug LaMalfa, R-Chico.
The bill extends key parts of the 2017 tax law, which lowered most income tax rates. Major provisions of that law were due to expire at the end of this year.
Who benefits?
The analysis, similar to that of other research groups, found that in California, as elsewhere, the rich do get bigger benefits.
About 70% of the tax reductions go to the top 20% of income earners, or those making at least $174,800.
Put another way, people with incomes of $174,800 to $450,700 would get an average tax reduction of $6,020, or 2.3% of their family income.
Those making $450,700 to $1.08 million would get an average tax break of $19,110, or 2.9% of their net income.
The percentages are less for middle income earners. People earning between $106,600 and $174,800 would get a break amounting to about 1.5% of their net income.
The middle class can benefit from several new tax breaks, notably the expanded deduction for state and local taxes. Taxpayers with modified adjusted gross incomes of up to $500,000 qualify for the full amount, and the bigger deduction is then phased out for those making up to $600,000.
Prior to 2018, such deductions were unlimited. In Sacramento County about one-third of taxpayers deducted an average of $12,000 before the law passed in 2017 was enacted. After the change, 13% took the deduction in 2022.
Independent research groups have made similar findings. “Average tax cuts are generally larger as a percentage of after-tax income for higher income households than for lower income households,” said the nonpartisan Tax Policy Center.
It said 60% of the benefits nationwide would go to people with incomes of about $217,000 and up.
This story was originally published July 24, 2025 at 4:23 PM with the headline "Why people who earn less in California will get smaller tax breaks from the Trump plan."
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