Tax Day is one of the most dreaded days of the year. Fortunately, this and future Tax Days will be less dreadful because last July, Congress passed the One Big Beautiful Bill Act. That legislation cut taxes and, more critically, prevented President Donald Trump’s major 2017 tax cuts from expiring this year.
If those tax cuts had expired, tax withholdings would now reflect the most severe and broad-based tax increases in many decades — higher rates, a reduced standard deduction and child tax credit, a greatly expanded alternative minimum tax and death tax, and more. Instead of a tax cut, individuals could be dealing with a more than $350 billion per-year tax increase — an average of nearly $3,000 per household.
Taxes as a share of the economy could have hit historically high levels. The Congressional Budget Office estimated that if the 2017 Trump tax cuts had expired, federal taxes would have been about 18% of GDP in 2026. Factor in tariff increases, and 2026 likely would’ve been only the second year since 2001 when federal revenues exceeded 18% of GDP. The other was 2022, when high revenues were driven by unusually high capital gains realizations and a major spike in inflation, not by tax changes.
Another recent painful tax year was 2013, when Congress allowed a partial expiration of President George W. Bush’s tax cuts. But Congress extended most of the expiring Bush tax cuts for taxpayers outside the top tax bracket. Allowing the top tax rate to rise was economically damaging, but most taxpayers were spared from direct income tax increases. While the 2013 tax year was painful, a full expiration of the 2017 Trump tax cuts would’ve been more dramatic and widespread.
As a percentage of GDP, the 2000 tax year was the worst in recent memory. That year, federal tax revenue as a share of GDP hit 20% for the first time since World War II. But like 2022, the 2000 surge in revenues wasn’t driven by recent tax changes — Congress had just cut taxes in 1997. The booming stock market of the late 1990s to 2000 drove historically high tax revenues that year.
Before that, in the first year of Bill Clinton’s presidency, Congress passed the 1993 tax hikes, adding a new top tax bracket of 39.6%, among other changes. Altogether, it amounted to about a $50 billion per year tax hike — large relative to the size of the economy but smaller than an expiration of the 2017 Trump tax cuts would’ve been. Incidentally, the 1993 tax hikes worked out poorly for Democrats politically, as the next year they lost both houses of Congress for the first time in 40 years. Clinton then wisely pivoted toward spending restraint, declaring “the era of big government is over” as he worked with the Republican Congress to achieve a balanced budget, while signing the 1997 tax cuts.
The “bracket-creep” era of the late 1970s and early 1980s was painful for taxpayers but was more akin to the proverbial frog in boiling water than a sudden shock of high taxes. High inflation in that era pushed Americans into progressively higher tax brackets. In response, President Ronald Reagan and Congress passed historic tax cuts in 1981 that slashed rates and added annual inflation adjustments to prevent (most) future bracket creep, leading to an economic boom. The bracket-creep era was painful, but it was called bracket creep for a reason — the changes were relatively gradual. In contrast, the expiration of the 2017 Trump tax cuts would have caused a sudden jump in taxes.
President Lyndon B. Johnson imposed a 10% surtax on income taxes to fund the Vietnam War. That surtax caused taxes to spike in 1969 by somewhat more (relative to the economy’s size) than a hypothetical expiration of the Trump tax cuts. But Johnson’s surcharge was temporary, lasting only 15 months. The expiration of the 2017 tax cuts would have been permanent.
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To find a permanent tax increase more severe than the one Congress just averted, one probably must look back to the 1950 tax hikes that funded the Korean War (along with a temporary hike bill in 1951), if not further. If Congress had allowed the Trump tax cuts to expire, 2026 might have topped the ignominious list of the most painful tax increases of the past 75 years.
Averting a disastrous tax increase may not garner as much attention as the disastrous tax increase itself would have. But taxpayers should know that they dodged a huge bullet thanks to the One Big Beautiful Bill Act.
Preston Brashers is a research fellow with the Plymouth Institute at Advancing American Freedom.
