Trump’s Tax Cuts Give Breaks to Tied Workers, Overtime Workers, Seniors, and Business Owners, But White-collar Workers With College Degrees Don’t Benefit.
Happy Tax Day! LOL, yes it is! Here’s an explanation of what the new tax code means.
Trump signed the One Big Beautiful Bill Act on July 4, 2025. The law increased or created deductions for 5 specific groups: tipped workers, overtime workers, retirees over 65, small business owners and investors. Salaried workers who earn a fixed check did not receive one.
Leave for tipped workers, overtime workers, and seniors are all temporary. They expire in 2028. The 20% deduction for business owners is permanent.
Figures at $80,000 make it concrete. 4 employees all making $80,000 a year now owe vastly different amounts to the IRS. A salaried high school teacher owes about $15,600 in federal taxes. A restaurant server earning the same $80,000 (including tips) owes about $10,700. A police officer making the same $80,000 (including overtime) owes about $12,800. A retired electrician collecting $80,000 in pensions and Social Security owes about $5,000.
The gap is widening. On $1 million in revenue, a single income entrepreneur could owe the IRS more than $300,000. A business owner earning the same $1 million would owe about $240,000 because of the 20% permanent withholding tax on qualified business income. An investor who earns $1 million in long-term profits would owe about $200,000. A venture capitalist who creates $1 million in common stock in qualified small businesses can legally bring the bill down to $0 if the shares are held for five years or more.
Professionals such as doctors, lawyers, accountants, counselors, and financial advisors are expressly excluded from the 20% business income deduction, even if they own their own practices. The law treats a doctor who runs a medical office differently than a plumber who runs a business of the same income level. Both have small businesses. Only one gets a break.
Tips and overtime deductions come with hard caps, work limits, and income streams. The Tax Policy Center estimates about 3% of households qualify for the tip deduction and about 9% qualify for the overtime deduction. For those who qualify, the savings are real. A CPA on Long Island told Bloomberg that its clients are “starting to come to the wind.” A small business owner in Wisconsin called the 20% deduction “huge.”
The cost of tips and overtime deductions combined through 2028 is about $122 billion. The cost of making 20% of the corporate income tax deduction permanent is about $737 billion over 10 years. Temporary leave that helps servers and police costs the government a fraction of what permanent leave costs for business owners.
College graduates have voted for Democrats in the last 3 presidential elections by an average of 20 points, according to the Pew Research Center. Americans without a bachelor’s degree favored Trump by an average of nearly 10 points over the same period. The 2024 election widens that gap. The tax code now shows the difference.
