What would it take for Trump to sign ‘the biggest tax cut we’ve ever had’?
President Donald Trump is set to unveil a broad guide Wednesday to his approach to tax reform. More details will reportedly come in June, but Mr. Trump has hinted at one specific expectation.
“It will be bigger, I believe, than any tax cut ever,” the president told AP’s Julie Pace on Friday. “Maybe the biggest tax cut we’ve ever had.” This is the kind of rhetoric that ignites our happy research hearts at NewsHour. What would it take, we wondered, for Trump to pass the biggest tax cut ever?
First, let’s define terms. We are turning to a go-to metric: constant (inflation-adjusted) dollars per gross domestic product. This allows us to compare tax cuts in terms of what they meant to their times and economy. Next, we want to share our key source: This comparison chart from the U.S. Treasury.
We used them to find the biggest tax cuts (per GDP) since 1940:
- Reagan, 1981: 2.89 percent of GDP. The Economic Recovery Act of 1981 was the first of two large tax cut bills passed under the 40th president. It significantly dropped income tax rates and added a host of other tax-decreasing changes.
- Truman, 1945: 2.67 percent of GDP. The Revenue Act of 1945. As World War II closed, the government moved income tax rates back downward. The top rate shifted from 94 percent to 87 percent. Corporate rates moved from 40 percent to 38 percent.
- Obama, 2013: 1.78% of GDP. The American Taxpayer Relief Act of 2012 came about after long wrangling over the fiscal cliff (memories!). It was a budget compromise deal between Republicans and Democrats. It came under President Obama, but largely made some Bush-era tax cuts permanent.
- George W. Bush, 2001: 0.7% of GDP. The Economic Growth and Tax Relief Reconciliation Act, known as EGTRRA, was the largest single tax cut under Bush 43, and was passed by June of his first year. Bush went on to pass several other tax cuts and would likely move up the list in terms of total tax cuts during a single presidency.
During the 2016 campaign, the nonpartisan Tax Policy Center estimated Trump’s tax cut proposal would amount to 2.6 percent of GDP, putting him third on our list.
So, with GDP next year forecast in the neighborhood of $20.1 trillion, Trump would need tax cuts worth $58 billion to achieve the largest tax cut ever (by this measure).
For perspective, Congress has had difficulty settling issues involving a few billion dollars. (Example: the coal miners’ fight that may risk a government shutdown. See our story, we think it’s worth watching.) But working in Trump’s advantage is that Republicans generally agree on a broad approach, collapsing rates and simplifying the tax code. But there are a lot of devils in the details of any tax cut, much less the “biggest ever.”