Cameron Miranda
The Tax Cuts and Jobs Act (TCJA), also known as the One Big Beautiful Bill Act (OBBBA), was a major tax reform signed into law by former US President Donald Trump in 2018. The act was aimed at reducing taxable income for some workers and simplifying the tax system. It included measures such as removing the mandate requiring individuals to purchase health insurance, raising the standard deduction, and providing tax breaks for retirees. However, the law was criticised for benefiting high-income households more than low and moderate-income households, and for eroding the US revenue base.
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What You'll Learn
The Tax Cuts and Jobs Act (TCJA)
The TCJA was the largest tax code overhaul in three decades and impacted taxpayers and business owners, particularly through tax cuts. The law created a single flat corporate tax rate of 21%. Many of the tax reform benefits for individuals were set to expire in 2025, including the removal of the mandate requiring individuals to purchase health insurance. The TCJA also nearly doubled the standard deduction from previous years.
The Joint Committee on Taxation estimated that the tax bill would most benefit workers and families making less than $50,000 per year, with bigger paychecks of $10,000 or more in annual take-home pay. The bill also included provisions such as no tax on tips, overtime, or social security, and a permanent increase in the Child Tax Credit for over 40 million families.
The TCJA was projected to reduce federal revenues by nearly $1.5 trillion over ten years, which could limit future public investment in infrastructure, workforce development, and healthcare. A 2019 analysis by the New York Times reported that tax revenues for 2018 and 2019 fell more than $430 billion short of what was predicted before the tax law was approved.
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The One Big Beautiful Bill Act (OBBBA)
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law. The OBBBA is a significant piece of legislation that builds on and amends the Tax Cuts and Jobs Act (TCJA) of 2017. It aims to benefit workers and families, boost the economy, strengthen border security, and modernize the country's infrastructure.
The OBBBA makes several changes to the tax code, including extending the tax brackets introduced by the TCJA beyond their original expiration date in 2025. These brackets range from 10% to 37% and will be adjusted for inflation. The Act also includes additional temporary tax cuts for individuals and corporations, with the Joint Committee on Taxation estimating that it will most benefit those with incomes below $50,000 per year.
In addition to tax cuts, the OBBBA introduces a $12.5 billion modernization of the air traffic control system, a permanent increase in the Child Tax Credit for over 40 million families, and a plan to secure borders by completing the border wall and hiring additional personnel. The Act also aims to drive down energy costs by expanding domestic oil and gas production capacity and provides a tax deduction for auto loan interest on American-made vehicles.
Furthermore, the OBBBA offers protection for two million family farms from double taxation and creates "Trump Accounts" for every American newborn. It also proposes to strengthen Medicaid by eliminating waste, fraud, and abuse, as well as blocking illegal immigrants from receiving benefits. The Act includes funding for the Golden Dome missile defense system and modernizing the military to ensure it remains a lethal fighting force.
The OBBBA is expected to increase budget deficits, with estimates ranging from $3.0 trillion to $4.5 trillion over the next decade. However, it is projected to increase long-run GDP and GNP, albeit modestly, and improve stability and investment incentives.
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The 2017 Trump Tax Law
The TCJA was designed to simplify the tax system and provide tax relief to Americans, particularly workers and families with incomes below $50,000 per year. It nearly doubled the standard deduction for all filers, raised the child tax credit, and created a non-refundable credit for non-child dependents. It also eliminated the individual mandate of the Affordable Care Act, which had imposed tax penalties on individuals who did not obtain health insurance coverage. Additionally, it introduced tax breaks for retirees, exempting qualified tips and overtime income from federal taxes and providing a deduction for interest paid on auto loans.
However, the 2017 Trump Tax Law was criticized for benefiting high-income households more than low and moderate-income households. It reduced federal revenues, with the Congressional Budget Office (CBO) estimating a revenue loss of $1.9 trillion over ten years. This revenue loss limited the government's ability to invest in national priorities and contributed to an increase in the national debt. The law was also projected to widen public deficits, impacting future investments in infrastructure, workforce development, and healthcare.
The TCJA had a mixed impact on individuals, with varying effects based on income levels, filing status, and deductions. While some taxpayers benefited from the increased standard deduction and child tax credit, others faced higher taxes, particularly those in upper-middle-class families in high-tax states. Additionally, the law's individual income and estate tax provisions were set to expire at the end of 2025, creating uncertainty and the potential for tax increases if not extended.
Overall, the 2017 Trump Tax Law represented a significant shift in tax policy, with both supporters praising its simplification and relief measures and critics pointing to its regressive nature and negative fiscal impact.
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The impact of the tax law
The Tax Cuts and Jobs Act (TCJA), also known as the One Big Beautiful Bill, was signed into law by President Trump in 2017 and took effect in 2018. It was the largest tax code overhaul in three decades, and it made substantial changes to individual and corporate income taxes. The impact of the TCJA has been felt in several areas, including:
Tax Revenue and Deficits
The TCJA reduced federal tax revenues, with tax revenues for 2018 and 2019 falling short by more than $430 billion compared to pre-TCJA predictions. The Congressional Budget Office (CBO) estimated that the law would cost $1.9 trillion over ten years, and recent estimates suggest that making the temporary tax cuts permanent could cost an additional $400 billion per year from 2027 onwards. The law has been criticised for eroding the US revenue base and widening public deficits.
Economic Growth and Investment
Proponents of the TCJA argued that it would boost economic growth and investment. However, research has failed to find evidence of a significant surge in investment or wages as a result of the law. The Congressional Research Service and the Brookings Institution, for example, found no indication of a wage increase in 2018 or 2019 that could be attributed to the TCJA.
Impact on Households
The impact of the TCJA on households has been mixed. The Joint Committee on Taxation estimated that while households earning $20,000 to $30,000 would pay more under the law, those earning over $1 million would pay less. The law also doubled the standard deduction and raised the child tax credit, benefiting families. However, it has been criticised for disproportionately benefiting high-income households and failing to deliver promised economic gains for workers and families.
Healthcare
The TCJA removed the individual mandate, a provision of the Affordable Care Act that required individuals to purchase health insurance. This change has been cited as a reason for the reduction in health insurance coverage and the increase in healthcare premiums.
State and Local Governments
The TCJA has impacted state and local governments, particularly through the $10,000 cap on the state and local tax (SALT) deduction. This change has reduced the tax benefits for high-earners in states with high taxes and property values, and it has shifted the tax burden from the federal government to state and local governments.
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Extending the Trump tax cuts
The Tax Cuts and Jobs Act (TCJA), also known as the One Big Beautiful Bill, was signed into law by President Trump in 2017. The Act was a major overhaul of the tax code, impacting both taxpayers and business owners through tax cuts and changes to the tax system.
The TCJA was set to expire after 2025, with many of the tax benefits for individuals and families expiring in that year. This includes the suspension of the personal exemption, which was $4,150, and the increased standard deduction, which for single filers was $15,000 for the 2025 tax year. In addition, the TCJA removed the mandate requiring individuals to purchase health insurance and introduced several relief measures aimed at reducing taxable income for some workers, such as exempting qualified tips from federal income tax and making overtime fully deductible after 2025.
However, there are concerns about the impact of extending the Trump tax cuts. The 2017 tax law has been criticized for benefiting high-income households more than low and moderate-income households, and extending the individual income and estate tax provisions would provide further windfall benefits to the wealthy. The Congressional Budget Office (CBO) estimated that the 2017 law would cost $1.9 trillion over ten years, and making the temporary individual income and estate tax cuts permanent would cost another $400 billion annually from 2027 onwards. This has contributed to a significant fall in federal revenue, with tax revenues for 2018 and 2019 falling short by more than $430 billion compared to predictions.
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Frequently asked questions
The name of the Trump tax law is The One Big Beautiful Bill Act, also known as the Tax Cuts and Jobs Act (TCJA).
The Trump tax law includes tax cuts for workers and families, the removal of tax on tips, overtime, and social security, and a modernization of the air traffic control system. It also includes protection for family farms from double taxation, the creation of Trump Accounts for newborns, and the strengthening of Medicaid.
The Trump tax law was passed by the Senate on December 20, 2017, and signed into law by President Trump on December 22, 2017.
The impact of the Trump tax law is disputed. Some sources claim that it will boost the after-tax incomes of high-income households, while others argue that it will increase deficits and limit support services. The Congressional Budget Office (CBO) estimated that the law would cost $1.9 trillion over ten years.
