In the summer of 2025, Congress passed a new taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. cut law, the One Big Beautiful Bill Act (OBBBA), to extend the expirations of the Tax Cuts and Jobs Act (TCJA) and enact several of the president’s tax cut ideas. Altogether, the OBBBA will reduce federal tax revenue by $5 trillion from 2025 through 2034, conventionally measured. The OBBBA also included spending cuts that offset some of its deficit impact.
Several political leaders, including the White House, have touted the OBBBA as the “largest tax cut in American history.” While significant, the OBBBA is not the largest tax cut in American history; it’s the sixth largest.
To understand and compare the magnitude of different tax cuts over time, we can compare how much they reduced tax revenues relative to the size of the economy at the time, specifically as a share of GDP. (For the revenue effects of past tax bills, we rely on data from the US Treasury and the Congressional Budget Office.)
Looking at just the tax provisions and not the spending changes, the OBBBA reduces federal tax revenue by 1.4 percent of GDP over the 10-year budget window on average. It is much larger than the TCJA, which was the 10th largest tax cut at the time it was enacted (now the 11th as the OBBBA ranks above it), reducing revenue by 0.69 percent of GDP on average.
Table 1. Top 10 Tax Cuts in US History since 1940
Note: ^ The “full-year effect” for the first year of revenue was used, rather than the effect on the first fiscal year after enactment. All estimates are conventional, i.e., they assume no macroeconomic changes in response to the tax changes.
Source: Jerry Tempalski, “Revenue Effects of Major Tax Bills”; Congressional Budget Office, “Revenue Projections, by Category”; Tax Foundation General Equilibrium Model; author calculations.
The five largest tax cuts since 1940 are the Economic Recovery Tax Act of 1981; the Revenue Acts of 1945, 1948, and 1964; and the American Taxpayer Relief Act of 2012. They reduced revenue by between 1.6 percent and 2.9 percent of GDP, on average.
The Revenue Acts of 1945 and 1948 were major postwar tax cuts to relieve Americans of heavy wartime tax burdens. The Revenue Act of 1964 was proposed by President Kennedy and signed into law by President Johnson to “reduce the drag on private purchasing power, profits, and employment,” significantly lowering both corporate and individual income taxes. The Economic Recovery Tax Act of 1981 was enacted under President Reagan, simplifying business taxation and significantly reducing individual income tax rates. The American Taxpayer Relief Act of 2012 extended many of the Bush-era tax cuts, among other tax changes.
Along with signing the OBBBA into law to cut taxes, President Trump has also imposed several new International Emergency Economic Powers Act (IEEPA) tariffs and national security Section 232 tariffs that raise revenue. In some cases, the Trump administration has described the tariffs as a way to pay for the tax cuts. As of November 1, we estimate the new tariffs will increase tax revenue by $2.4 trillion from 2025 through 2034 (conventionally measured), amounting, on their own, to the largest tax increase since 1993.
The tariffs will offset a portion of the OBBBA tax cut provisions, resulting in a net revenue reduction of $2.6 trillion from 2025 through 2034, or 0.73 percent of GDP. The combination ranks as the eighth largest tax cut since 1940, closer in magnitude to the original 2017 TCJA. The OBBBA also included reductions in government spending, offsetting about $1.1 trillion of the deficit impact.
Though it is a significant tax law, the reduction in tax revenue from the OBBBA ranks not as the largest, but as the the sixth largest tax cut in US history. Factoring in the president’s tariffTariffs are taxes imposed by one country on goods imported from another country. Tariffs are trade barriers that raise prices, reduce available quantities of goods and services for US businesses and consumers, and create an economic burden on foreign exporters. tax increase further drops its ranking to the eighth largest tax cut in US history.
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