Largest Tax Cuts in US History Ranked by Share of GDP

The largest tax cuts in U.S. history, ranked by share of GDP, are led by Ronald Reagan’s Economic Recovery Tax Act of 1981 at 2.89% of GDP, followed by the Revenue Act of 1945, the Revenue Act of 1948, the American Taxpayer Relief Act of 2012, the Revenue Act of 1964, and the One Big Beautiful Bill Act of 2025.¹ Share of GDP is the yardstick most economists use because it adjusts for the size of the economy at the time each law was enacted; a tax cut worth billions in the 1940s was a far bigger event, relative to the country, than the same nominal figure today.²

The Ranking Since 1940

The figures below are the Tax Foundation’s conventional revenue estimates, averaged over each law’s ten-year budget window and expressed as a percentage of GDP.¹

1. Economic Recovery Tax Act of 1981 — 2.89% of GDP

Signed by President Reagan in August 1981, ERTA cut individual marginal tax rates across the board by 25% and introduced indexation of tax brackets to prevent bracket creep. It also overhauled business depreciation through the Accelerated Cost Recovery System.³ The Committee for a Responsible Federal Budget has called it the largest tax cut as a share of GDP since 1918.²

2. Revenue Act of 1945 — 2.67% of GDP

Enacted as World War II ended, the law fully repealed the wartime excess profits tax and reduced both corporate and individual income tax rates. It cut federal revenue by $5.9 billion in 1946, the first large-scale tax reduction since 1929.⁴

3. Revenue Act of 1948 — 1.87% of GDP

Passed over President Truman’s veto, this postwar cut reduced individual income tax rates by 5% to 13%, raised the personal exemption from $500 to $600, permitted married couples to split their income for tax purposes, and added an extra exemption for taxpayers 65 and older. It reduced revenue by $5 billion in the year after enactment, equivalent to 11.3% of total federal receipts.⁵

4. American Taxpayer Relief Act of 2012 — 1.78% of GDP

Signed on January 1, 2013, to avert the fiscal cliff, ATRA permanently extended the Bush-era tax rates for income below $400,000 (single) or $450,000 (joint), set the estate tax exemption at $5 million indexed for inflation, and patched the alternative minimum tax. Failing to act would have raised taxes by more than $500 billion in 2013 alone.⁶

5. Revenue Act of 1964 — 1.60% of GDP

Originally proposed by President Kennedy and enacted after his assassination, the bipartisan law cut the top individual rate from 91% to 70% and the bottom rate from 20% to 14%, while reducing the corporate rate from 52% to 48%. The Joint Committee on Internal Revenue Taxation projected a full-year revenue loss of $11.5 billion.⁷

6. One Big Beautiful Bill Act of 2025 — 1.40% of GDP

Signed by President Trump on July 4, 2025, the law makes permanent the individual tax rate reductions from the 2017 Tax Cuts and Jobs Act, raises the child tax credit, increases the state and local tax deduction cap, and creates new deductions for tips, overtime, and seniors. The Congressional Budget Office estimates it will reduce federal revenues by $4.5 trillion over ten years.⁸ That nominal figure is the largest ever, but by GDP share it ranks sixth on the Tax Foundation’s list. When revenue from the Trump administration’s tariff policies is netted against the tax cuts, the figure falls to 0.73% of GDP, pushing the law down to eighth.¹

Why Share of GDP Rather Than Dollars

In raw nominal dollars, almost every new tax cut looks like the biggest ever, because the economy and the federal budget grow over time. A $5 billion revenue reduction in 1948 was a far larger share of the country’s income than the same number would be now. Economists across the political spectrum consider nominal dollars the least useful comparison for that reason, and the standard approach is to measure revenue change against GDP at the time of enactment.²

That is why the 1981 Reagan cut, scored at 2.89% of GDP, continues to anchor the top of the modern list even though its nominal cost is a fraction of the 2025 law’s. The two biggest wartime-to-peacetime transitions, in 1945 and 1948, sit just behind it. Together these three laws defined the twentieth-century high-water mark for tax cuts measured against the size of the economy.

Where the TCJA and Pre-1940 Cuts Fit

The 2017 Tax Cuts and Jobs Act, often described during its passage as historically large, ranks eleventh on the Tax Foundation’s list, reducing revenue by 0.69% of GDP over its budget window.¹

The post-World War I period also saw dramatic tax reductions. The top individual income tax rate was cut from a wartime peak of 77% in 1918 down to 25% by 1925. Comparable GDP-share estimates for those cuts are less standardized, which is why most modern rankings begin with the 1940s.⁹

The Baseline Question Behind the 2025 Ranking

Where the One Big Beautiful Bill Act sits on the list depends on an accounting choice that is worth understanding. Roughly $4 trillion of the law’s cost comes from making the existing TCJA rates permanent rather than enacting new, lower rates. Under the current law baseline used by the Congressional Budget Office and the Joint Committee on Taxation, extending those rates counts as a tax cut because the TCJA was scheduled to expire at the end of 2025. Under a current policy baseline, which assumes expiring provisions would have been renewed anyway, the extension costs essentially nothing, and only the genuinely new pieces (tips, overtime, the child credit increase, the SALT expansion) register as tax cuts.¹⁰

Senate Republicans used the current policy baseline during the reconciliation process, and under that framework the Joint Committee on Taxation scored the law’s net revenue impact at just $442 billion.¹¹ The Brookings Institution argued that this approach “effectively masks more than $4 trillion in additional revenue loss.”¹² The Yale Budget Lab stated that under a current law baseline, the TCJA’s scheduled expiration “does not increase taxes, since the tax system’s reversion to pre-TCJA rules is included in the baseline.”¹³

The White House has framed the same math in the opposite direction, saying that allowing the TCJA to expire would have amounted to “the largest tax hike in history,” a $4 trillion increase on working families.¹⁴ The Council of Economic Advisers made the same argument, estimating that the pre-OBBBA current law path would have led to a “$4 trillion tax hike over 10 years.”¹⁵

The House Ways and Means Committee called the 2025 law “the largest tax cut in American history” outright.¹⁶ By the measure most economists prefer, that claim does not hold: Reagan’s 1981 act, at more than double the GDP share, remains the modern benchmark, and the two postwar Revenue Acts both outrank the 2025 law as well.

1
Tax Foundation. Is the OBBBA the Largest Tax Cut in American History
2
Committee for a Responsible Federal Budget. President Trump’s Tax Cut: Largest in History Yet?
3
Tax Foundation. Retrospective on the 1981 Reagan Tax Cut
4
Tax Notes. Timelines of Tax History: Class Tax to Mass Tax During World War II
5
U.S. Department of the Treasury. Treasury Working Paper 81
6
Tax Policy Center. What Did the American Taxpayer Relief Act of 2012 Do
7
Bipartisan Policy Center. U.S. Tax Reform Timeline: 1945 to Present
8
Congressional Budget Office. Estimate for Public Law 119-21
9
Concord Coalition. Historical Tax Rates: The Rhetoric and Reality of Taxing the Rich
10
Peter G. Peterson Foundation. Why Do Budget Baselines Matter
11
Senate Finance Committee. Crapo Statement on JCT Analysis of Tax Title
12
Brookings Institution. OBBBA Preliminary Assessment
13
Yale Budget Lab. Tax Cuts and Jobs Act Expiration: Options for the Tax Code
14
The White House. The Largest Tax Cut in History for Working and Middle-Class Americans
15
The White House. The Economic and Fiscal Benefits of the One Big Beautiful Bill Act
16
House Ways and Means Committee. Passed: The One Big Beautiful Bill – The Largest Tax Cut in American History