How California’s wealthiest people benefit most from the Republicans’ tax cut
No matter how you configure the impact of the Big Beautiful Bill’s tax breaks, wealthier Californians stand to get more benefits.
That’s the finding of a new study Friday from the Institute on Taxation and Economic Policy.
The progressive Washington research group found that a state resident with an average overall income of $44,500 would save $840, or 1.9% on their federal income tax next year under the tax legislation passed Thursday by the House.
Bump the income to $81,200, roughly the mid range of state residents’ earnings, and the savings would be an estimated $1,900, or 2.3%.
But those whose incomes average $659,300 would get a savings of $19,410, or 2.9%.
The findings, similar to those of other tax studies, include almost all of the savings and revenue raisers in the bill narrowly passed by the House.
Nationwide, the nonpartisan Tax Policy Center found that while eight of 10 households would get a tax cut next year under the bill, 60% of the cuts would go to the top 20%.
Will the middle class get help?
That bill, which will be considered by the Senate when it returns next month, got no Democratic votes. Party lawmakers echoed the same message, that the bill helps primarily the rich.
For Republicans, “it’s billionaires over hardworking families and fiscal responsibility — it’s that simple,” said Sen. Alex Padilla, D-Calif.
GOP lawmakers insisted that people at all income levels will get a meaningful tax benefit. The lower tax rates enacted in 2017 are due to expire at the end of the year, and letting that happen would mean a big tax increase for everyone.
California Republicans were pleased that lower- and middle-income residents will be able to deduct more of their state and local taxes, or SALT. The deduction, now capped at $10,000, would rise to $40,000 for those with taxable incomes of less than $500,000.
The change “is a huge win that allows middle-class families I represent to keep more hard-earned money in their pockets,” said Rep. Young Kim, R-Anaheim, who helped lead the fight to increase the SALT deduction.
The bill has other new breaks. The child-care credit would increase for qualifying families. Seniors over 65 will be able to deduct more. Car buyers will be able to deduct interest on auto loans if they buy American-made vehicles. Tax on overtime and tips for lower- and middle-income workers would be eliminated.
At the same time, the bill cuts spending for Medicaid, called Medi-Cal in California, that health care advocates warn could mean huge numbers of people could lose their health care coverage. And many tax incentives for clean energy products and electric vehicles would end or be weakened.
While these breaks still need to survive a somewhat wary Senate, the tax rates are seen as stirring little controversy among Republicans who control the chamber.
California tax breaks
The ITEP analysis breaks down the impact on California residents this way next year if the House bill becomes law. Percentages can drop at higher incomes because some tax breaks are phased out for wealthier earners. Percentage of savings is based on average incomes in each bracket. For income, ITEP uses a complex formula that is an average of a household’s total income.
The 2026 estimates:
▪ Bottom 20% of incomes, up to $31,000. Average income within the bracket, $17,300. Average tax change, $170, 1%.
▪ Second 20%, $31,000 to $59,600. Average income, $44,500. Average tax savings, $840, 1.9%.
▪ Middle 20%, $59,600 to $106,600. Average income, $81,200. Average tax savings, $1,900., 2.3%
▪ Fourth 20%, $106,600 to $174,800. Average income, $138,900. Average tax savings, $2,490, 1.8%
▪ Next 15%, $174,800 to $450,700. Average income, $266,600. Average tax savings, $6,070, 2.3%
▪ Next 4%, $450,700 to $1.09 million. Average income, $659,300. Average tax savings, $19,410, 2.9%
▪ Top 1%, $1.09 million and above. Average income, $3.5 million. Average tax savings, $36,470, 1%.
This story was originally published May 23, 2025 at 12:32 PM with the headline "How California’s wealthiest people benefit most from the Republicans’ tax cut."
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