UPDATE (July 1, 2025, 12:17 p.m. ET): On Tuesday afternoon, following an all-night voting session, JD Vance cast the tie-breaking vote to pass the Senate’s version of Trump’s megabill. It now heads back to the House.
For weeks, Republicans have promised their sprawling reconciliation bill will supercharge the economy, paying for itself in the process. Now, the nonpartisan Congressional Budget Office has delivered its verdict: The House version of the bill would deliver measly economic growth and add $3.4 trillion to the national debt. For anyone who has studied how inequality affects our economy, this should come as no surprise. Simply put, the GOP reconciliation bill misunderstands how economic growth actually works.
The CBO’s analysis confirms what research has shown for years — tax cuts skewed heavily toward the wealthy don’t generate the broad-based economic growth their proponents promise. Instead, the House bill would increase annual gross domestic product by a measly 0.09%, while showering the top 0.1% of earners with a roughly $390,070 windfall each. Meanwhile, the lowest-income households would lose $820 on average because of cuts to health and nutrition programs.
Inequality subverts institutions, distorts demand and obstructs human capital and talent.
To begin with, this represents a moral failing of GOP lawmakers. But it is also exactly the kind of policy approach that constrains our economy, rather than unleashing its potential. In her research, Boushey has documented how sustainable growth requires widespread prosperity, not just wealth concentration. In recent decades, as the wealth of the top 1% has exploded, both economic mobility and growth have declined.
The truth is, inequality contains growth. It subverts institutions, distorts demand, and obstructs human capital and talent.
When families struggle to afford child care, housing or health care, they can’t fully participate in the economy as consumers, workers or entrepreneurs. When young people can’t access quality education or the capital to start businesses, we lose their future ideas and innovations. Furthermore, when millions of working families struggle to afford basic needs, cuts to programs that help them end up reducing their purchasing power and weakening the consumer demand on which businesses depend.
The ”trickle-down economics” of the Republican bill has been GOP orthodoxy for years — and has never worked. Rather than doubling down on failed theories, Congress should pursue policies that build economic growth. This means addressing the extreme concentration of wealth that has reached levels not seen since the 1920s.
Multiple approaches exist to rebalancing our economy. We should reform how we tax capital gains. We should ensure that corporations pay more in taxes. And lawmakers should especially get serious about taxing extreme wealth, concentrated at the top 0.1%, in order to chip away at the economic power of the ultrarich and raise revenue for critical investments.
Multiple approaches exist to rebalancing our economy.
Reducing inequality is both morally imperative and economically essential. When we allow a small number of ultrawealthy individuals to accumulate extreme fortunes while working families struggle, we create an economy that works less efficiently for everyone. And as our nation’s experience with Elon Musk demonstrates, it significantly undermines our democracy as well.
Our nation can continue policies that concentrate wealth and constrain growth, or build an economy in which everyone shares opportunities and benefits from growth. The evidence overwhelmingly points toward the latter path. It’s time for our tax policy to follow the evidence.
Heather Boushey
Dr. Heather Boushey is a senior research fellow at the Reimagining the Economy Project at the Harvard Kennedy School. She previously served on the White House Council of Economic Advisers and as the chief economist for President Biden’s Invest in America Cabinet.
David Mitchell
David Mitchell is a senior fellow for tax and regulatory policy at the Washington Center for Equitable Growth.