Presidential candidates Donald Trump and Kamala Harris have both called for substantial changes to the US 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. system. We’ve compared the projected revenue change of both candidates’ tax plans to historical tax changes since 1940, averaging the annual revenue change of each law or proposal as a share of GDP over the years for which the data is available.
We find Harris’s tax plan would rank as the 15th largest tax increase since 1940 and the 6th largest tax increase outside of wartime over the same period. Trump’s combination of tariffs and tax changes would rank as the 6th largest tax cut since 1940. However, Trump has indicated he would pursue 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. hikes on their own without requiring Congressional approval. If tariffs rise without accompanying tax cuts, they would rank as the 7th largest tax increase since 1940, and the largest tax increase outside of wartime over the same period.
Comparing Harris and Trump on Taxes
Harris has proposed a collection of tax increases, tax cuts, and expanded tax credits we estimate would raise tax revenues on net by $1.7 trillion from 2025 through 2034, an average increase of 0.5 percent of GDP. That’s due to a combination of $4.1 trillion of tax increases (1.2 percent of GDP) and $2.4 trillion of tax cuts and expanded credits (-0.7 percent of GDP).
Harris’s tax plan would rank as the 15th largest tax increase since 1940, and 6th largest tax increase outside of wartime over the same period.
Trump has proposed a collection of tax cuts, tax increases, and tariff increases we estimate would reduce tax revenues on net by $3 trillion from 2025 through 2034, an average decrease of 0.8 percent of GDP. This includes a combination of $7.8 trillion of tax cuts (-2.2 percent of GDP), $921 billion of higher revenues from repealing green energy tax credits (0.3 percent of GDP), and $3.8 trillion of increased revenue from tariffs (1.1 percent of GDP).
Trump has indicated he intends to use executive authority to impose tariffs without requiring congressional approval; imposing additional tariffs on Chinese imports to reach 60 percent plus universal 20 percent tariff on all imports would rank as the 7th largest tax increase since 1940, and the largest tax increase outside of wartime over the same period. Trump’s tax proposals would rank as the third largest tax cut since 1940; and combined with the tariff increases, Trump’s full tax and tariff plan, would rank as the 6th largest tax cut since 1940.
Largest Tax Increases since 1940
The five largest tax increases since 1940 all came during wartime from 1941 to 1951, raising revenue between 1.2 percent and 5 percent of GDP, on average. The Revenue Acts of 1941 and 1942 and the Current Tax Payment Act of 1943 helped finance defense spending during WWII, and the Revenue Acts of 1950 and 1951 helped fund the Korean War.
By comparison to the largest historical tax increases, the 2018-2019 tariffs imposed by President Trump on more than $380 billion of foreign products increased customs duties between 0.1 percent to 0.2 percent of GDP, ranking as the 21st largest tax hike since 1940.
The Inflation Reduction Act (IRA) enacted under President Biden ranks as the 23rd largest tax hike since 1940, increasing taxes by 0.1 percent of GDP in years with significant revenue effects (though the actual revenue effects of the IRA are highly uncertain given changing utilization and rules surrounding its energy tax credits).
Largest Tax Decreases since 1940
The five largest tax reductions since 1940 are the Revenue Acts of 1945, 1948, and 1964; the Economic Recovery Tax Act of 1981; 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 taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. rates. The American Taxpayer Relief Act of 2012 extended many of the Bush-era tax cuts, among other tax changes.
By comparison to the largest historical tax cuts, the 2017 Tax Cuts and Jobs Act (TCJA) enacted under Trump ranks as the 10th largest tax cut since 1940, reducing tax revenues by an annual average of 0.7 percent of GDP, according to estimates from the Congressional Budget Office.
Pandemic-relief legislation also ranks relatively high, as policymakers under Trump and Biden relied on the tax code to distribute relief payments and support to individuals and businesses. Enacted under Trump, the CARES Act (-0.5 percent of GDP) ranks as the 14th largest tax cut since 1940, the Families First Coronavirus Response Act (-0.3 percent of GDP) as the 20th, and the Consolidated Appropriations Act of 2021 (-0.2 percent of GDP) as the 26th.
The American Rescue Plan Act (ARPA), enacted under Biden, would rank 20th based on its first two years of tax cuts (-0.3 percent of GDP), but incorporating the outyear effects, it falls to the 36th largest since 1940, at -0.1 percent of GDP overall.
Notes
We rely on two data sources for the revenue effects of past tax bills: a US Treasury paper titled “Revenue Effects of Major Tax Bills,” and the Congressional Budget Office’s “Estimates of the Revenue Effects, in Billions of Dollars, of Legislation Enacted From 1981 to 2023 That Has a Significant Impact on Revenues.”
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