Donald Trump doesn’t just love billionaires, he loves multimillionaires too

US tax policy deprives the government of revenue and overwhelmingly serves the interests of the rich

After the House passed its version of Donald Trump ’s One Big Beautiful Bill Act (OBBBA) last year – the one that paired a $5tn-plus tax cut with $1tn-plus of cuts from food stamps and Medicaid – the House speaker, Mike Johnson , explained that “this is not giving tax cuts to the millionaires”. The beneficiaries, he said, were “small business owners” that “provide the jobs in every community in America”.

Johnson was playing to the myth of the modest, sturdy Main Street job creator. It is an appealing story. It’s also the most consequential piece of BS distorting American policy that deprives the government of tax revenue, stunts American capitalism, twists regulations, thwarts competition and overwhelmingly serves millionaires’ interests.

The speaker was specifically talking about “pass through” businesses. About 95% of businesses in the country take this form. They employ half of all workers and generate more than half the nation’s business income. These creatures of the tax code are freed from paying the corporate income tax rate. Instead, their untaxed profits are distributed to their owners, who generally face lower individual tax rates, saving them billions.

Republicans have consistently gone to bat for pass throughs. In 2017 Ron Johnson, the Republican senator from Wisconsin, threatened not to vote for Trump’s Tax Cut and Jobs Act, relenting only after the Senate increased a tax deduction for pass-through business income from 17% to 20%. “I just have it in my heart a real affinity for these owner-operated pass-throughs,” Johnson said at the time .

That deduction, made permanent in the ”big beautiful bill” last year, will cost the budget $820bn over a 10-year period, almost as much as was cut from the Medicaid budget.

About 57% of the $1.3tn in pass-through income in 2022 went to 890,000 people in the richest 1% of the population, according to the Urban-Brookings Tax Policy Center. A study by economists at the Department of the Treasury, the Federal Reserve Bank of Minneapolis and Dartmouth University found that 35% of the total deductions in the year after the 2017 tax cut, a cold $54bn, flowed to taxpayers with income of at least $1m.

Johnson and Johnson know this. Senator Ron owned a stake in a pass-through, a plastics maker in Oshkosh, which he sold in 2020 for between $5 and $25m and upon which he built a fortune worth about $40m in 2018 , making him the sixth-richest senator at the time. Speaker Mike, a man of “ modest means ”, lives in a $3.7m townhouse steps from the US Capitol owned by the millionaire Republican donor Lee Beaman , who made his fortune from a string of car dealerships.

Next month, economists Owen Zidar from Princeton and Eric Zwick from the University of Chicago will publish a panoramic profile of these “ everywhere millionaires ”. They are your dentist and doctor, the car dealer and the insurance salesman, the lawyer and the real estate developer, the accountant, the consultant and the building equipment contractor.

They have largely organized themselves as pass-throughs. Many are amazingly rich.