Cameron Miranda
The United States has seen a series of tax laws over the years, with the most recent major changes occurring in 2025 under the One Big Beautiful Bill (OBBB) Act. Signed into law by President Trump, the OBBB Act builds on the 2017 Tax Cuts and Jobs Act (TCJA) and introduces broad tax provisions that impact individuals, businesses, and government entities. The TCJA, which was also introduced by the Trump administration, was criticized for favoring the wealthy and adding to the national debt. The OBBB Act aims to address some of these concerns by extending and modifying certain business and international tax provisions, while also providing tax relief to working Americans and seniors. While the OBBB Act is set to bring about many changes in 2026, some have already come into effect in 2025, impacting taxpayers' filing obligations and financial planning.
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What You'll Learn
Trump's 2017 Tax Law
In 2017, President Trump signed the Tax Cuts and Jobs Act (TCJA) into law. The TCJA permanently lowered corporate tax rates, but most individual tax cuts were set to end after 2025 unless extended by Congress. The Act included a variety of tax relief measures aimed at reducing taxable income for some workers. For example, the legislation exempted qualified tips from federal income tax and made overtime fully deductible after 2025.
The TCJA also eliminated the mandate for every adult to have health insurance, which was a key provision of the American Care Act. This move could result in increased insurance premiums and higher taxes for lower-income individuals in the future.
The TCJA was criticized for being skewed towards the rich and failing to deliver on promised economic benefits. It contributed to a significant drop in federal revenues, even after accounting for its impact on economic growth. The law's complexity and compliance issues also drew criticism, along with its potential to negatively impact healthcare premiums and coverage.
The One Big Beautiful Bill Act (OBBBA), signed into law by President Trump in 2025, extended and modified certain business and international tax provisions of the TCJA. These provisions included permanent restoration of 100% bonus depreciation, expensing for US-based research, and the EBITDA-based business interest expense limitation.
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Bush Tax Cuts
The "Bush Tax Cuts" refer to the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA). These acts were the biggest tax policy changes enacted under President George W. Bush. The Bush administration aimed to reduce the tax burden on American families and small businesses to spur savings, investment, and job creation.
The Bush Tax Cuts reduced tax rates for every American who pays income taxes, including creating a new 10% tax bracket, and increasing limits on IRA and 401(k) contributions. They also reduced the top tax rate on dividends and capital gains to 15%. These cuts provided $1.7 trillion in relief through 2008.
However, the Bush Tax Cuts have been criticized for benefiting high-income taxpayers the most. From 2004 to 2012, the top 1% of households received an average tax cut of over $570,000, increasing their after-tax income by more than 5% each year. The Tax Policy Center estimated that in 2010, the year the tax cuts were fully phased in, they raised the after-tax incomes of the top 1% of households by 6.7%, while only raising the after-tax incomes of the middle 20% of households by 2.8%.
The non-partisan Congressional Budget Office (CBO) reported that the Bush Tax Cuts did not pay for themselves and resulted in a significant decline in revenue for the Treasury. The CBO estimated that the Bush Tax Cuts added approximately $1.5 trillion to the debt over the 2002-2011 decade, excluding interest.
The Bush Tax Cuts were set to expire at the end of 2010 but were extended for two years as part of a budget deal. In 2012, President Barack Obama made the tax cuts permanent for low- and moderate-income households, while allowing certain tax rate cuts affecting only the highest-income taxpayers to expire.
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Tax Cuts and Jobs Act (TCJA)
The Tax Cuts and Jobs Act (TCJA) is a United States federal law that amended the Internal Revenue Code of 1986. It was enacted in 2017 and is also known as the Trump Tax Cuts. The TCJA is considered the most sweeping tax overhaul in decades, aiming to simplify the tax code, reduce taxes, and stimulate economic growth.
One of the key provisions of the TCJA was the reduction in corporate income tax (CIT) rates from 35% to 21%, which brought the American corporate tax rate closer to the OECD average. This move was expected to make the US a more attractive destination for foreign investment. The TCJA also lowered most individual income tax rates, including the top marginal rate, which decreased from 39.6% to 37%. Additionally, the standard deduction was increased significantly, benefiting single and married filers.
The TCJA eliminated personal exemptions and made it less advantageous to itemize deductions. It also introduced Opportunity Zones, designed to encourage economic development and job creation in distressed communities. The act is projected to result in 339,000 additional full-time equivalent jobs, contributing to higher wages and a larger economy.
However, the TCJA has faced criticism for disproportionately benefiting the wealthy. Studies indicate that it led to an increase in after-tax incomes for high-income households, while the bottom 80% of taxpayers received a smaller share of the benefits. The TCJA has also been blamed for increasing the federal debt and failing to deliver on promised economic growth, with modest effects on median wages.
In 2025, President Biden proposed adjustments to the TCJA, aiming to roll back provisions favoring high earners and large businesses. However, the core provisions of the TCJA remain unchanged as of 2025, and the One Big Beautiful Bill Act (OBBBA) extended and modified certain business and international tax provisions enacted under the TCJA.
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One Big Beautiful Bill Act (OBBBA)
The One Big Beautiful Bill Act (OBBBA) was signed into law by President Trump on July 4, 2025, following its passage by the House and the Senate. The OBBBA is a nearly 900-page budget reconciliation law that extends the 2017-era Tax Cuts and Jobs Act (TCJA) and includes a wide range of provisions that may affect city budgets, services, and infrastructure planning.
The OBBBA includes several tax deductions for tips, overtime pay, and auto loans. It creates Trump Accounts, allowing parents to create tax-deferred accounts for their children, set to expire in 2028. It also includes a permanent $200 increase in the child tax credit, a 1% tax on remittances, and a tax hike on investment income from college endowments. The OBBBA phases out some clean energy tax credits and promotes fossil fuels over renewable energy. It raises the debt ceiling by $5 trillion and cuts Medicaid spending by 12%. It also expands work requirements for SNAP benefits and makes states responsible for some costs related to the food assistance program.
In addition to the standard deduction or itemized deduction, taxpayers 65 and older can take an additional $6,000 off their taxable income. The State and Local Tax (SALT) Deduction provides a federal deduction for income and property taxes paid at the local and state levels. The SALT deduction cap has been raised to $40,000 for incomes under $500,000, with a gradual reduction for higher incomes. The OBBBA also includes a new type of savings account for children under 18.
The OBBBA has been praised for making "smart cuts" and providing stability for households. However, it has also been criticized for exacerbating inequality and social division, depriving vulnerable groups of access to healthcare, and increasing the complexity of the tax code.
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Corporate Tax Rates
At the federal level, the corporate tax rate is typically a flat rate that applies to all businesses. The current federal corporate tax rate in the US is 21%, a reduction from the previous rate of 35% enacted by the 2017 Tax Cuts and Jobs Act (TCJA). This Act changed the law of 'worldwide' to 'territorial' taxation, meaning that tax is imposed only on income derived within US borders, regardless of the taxpayer's residence.
At the state level, corporate tax rates vary by state, and some states do not levy a corporate tax rate at all. State corporate income tax rates can range from 0% to 9.8%gross receipts taxes, which are taxes on a business's total revenue without deductions. CIT rates, or taxes on corporate income, can range from 1% to 12% depending on the state.
In addition to federal and state corporate tax rates, there are also international tax provisions that can affect corporations operating in multiple countries. The recent One Big Beautiful Bill Act (OBBBA), signed into law by President Trump in 2025, includes modifications to certain international tax provisions.
It is important to note that corporate tax rates can change over time, and different tax laws and policies can impact the rates and the overall tax structure. For example, the TCJA, also known as the 2017 Trump Tax Law, made significant changes to tax rates and provisions, and there have been ongoing discussions about potential adjustments and course corrections.
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Frequently asked questions
The OBBBA was signed into law by President Trump on July 4, 2025. It includes legislation to stop most tax laws from reverting to what they were in 2017.
The OBBBA introduces broad, far-reaching tax provisions, including various business tax relief measures and revenue-raising measures. It also includes new tax deductions for certain workers and seniors.
The TCJA is a significant piece of tax legislation passed in 2017 that affected individuals, businesses, tax-exempt, and government entities. It included lower tax brackets, a bigger standard deduction, and expanded credits.
The Trump Tax Plan introduced several relief measures aimed at reducing taxable income for some workers, such as exempting qualified tips and overtime from federal income tax. It also eliminated the mandate for every adult to have health insurance.
President Biden proposed adjustments aimed at rolling back parts of the TCJA, especially provisions benefiting high earners and large businesses. However, the core provisions of the TCJA remain unchanged.
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