“This now allows for the passage of large scale Tax Cuts (and Reform), which will be the biggest in the history of our country!”
— President Trump, in a tweet, Oct. 20, 2017
On occasion, the White House has suggested Trump is talking only about the corporate-tax component of the tax plan. But that’s never how the president himself frames it. So we have to examine his claim as he states it.
Now that the House and Senate have approved the parameters of the tax cut –$1.5 trillion over 10 years — we have numbers we can evaluate. So, for the record, here’s how his plan stacks up — assuming it actually gets passed into law.
The best way to compare tax cuts (or spending plans) over time is to measure them as a percentage of the national economy. Inflation-adjusted dollars are another option, but a percentage of gross domestic product helps put the impact of the bill into context.
The Treasury Department has regularly compared tax cuts and increases using both methods, most recently in 2013. The Treasury analysis goes back to 1940, using either the first year of the tax legislation for tax bills between 1940 and 1968 or a four-year average of the bills between 1968 and 2012.
The budget blueprint approved by Republicans indicates that tax cut would reduce revenue by $167 billion in 2018; it also averages out to $167 billion a year in the first four years. We’ll use a gross domestic product of $19.5 trillion in 2018, which assumes the kind of growth Trump expects.
That means the tax cut would be nearly 0.9 percent of GDP.
Compare that to:
Economic Recovery Act of 1981 (Reagan): 2.89 percent
Revenue Act of 1945 (Truman): 2.67 percent
Revenue Act of 1948 (Truman): 1.87 percent
American Taxpayer Relief Act of 2012 (Obama): 1.78 percent
Revenue Act of 1964 (Johnson): 1.6 percent
Tax Relief and Job Creation Act of 2010 (Obama): 1.31 percent
In other words, Trump’s tax cut would even be smaller than two tax cuts passed by Congress under President Barack Obama. We’re sure that must be a source of irritation. In fact, Trump’s tax cut would even fall behind Obama’s tax cuts when measured by inflation-adjusted dollars, according to the Committee for a Responsible Federal Budget.
Here’s a useful chart put together by CRFB, which labels the Trump tax cut as “Framework.” The group also included an estimate for a 1921 tax cut from a 2012 paper by Christina Romer and David Romer.
The Pinocchio Test
We realize that the president often likes to say biggest or best, but his claim about the tax plan is embarrassing flimflam. He needs to drop this talking point. Saying it over and over does not make it so.
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