Tax Day Could Have Brought One of the Biggest Tax Hikes in 75 Years

Tax Day is one of the most dreaded days of the year. This year, it also came with a reminder of what Congress prevented. If the family and business tax relief enacted in the 2017 Tax Cuts and Jobs Act had expired, American households would now be facing a broad and immediate tax increase. Instead, The Working Families Tax Cuts stopped what could have been one of the largest tax hikes in decades.

What Congress Prevented

Had that 2017 tax relief expired, taxpayers would have faced higher tax rates, a lower standard deduction, a weaker child tax credit, a broader alternative minimum tax, and a larger death tax burden. Workers would have seen more taken out of their paychecks. Families would have had less room in their budgets.

As Preston Brashers of Advancing American Freedom explains, expiration would have meant more than $350 billion per year in higher taxes, or nearly $3,000 per household on average. That was not a narrow change aimed at a small slice of taxpayers. It would have reached across the tax code and hit families throughout the country.

This Would Have Been a Rarely Seen Tax Shock

The size of the increase matters, but so does the speed. This would not have been a slow drift upward. It would have been a sudden jump in tax burdens at a time when many families were already stretched.

The Congressional Budget Office estimated that if the 2017 Tax Cuts and Jobs Act’s family and business tax relief had expired, federal taxes would have reached about 18% of GDP in 2026. Factor in tariff increases, and next year likely would have been only the second year since 2001 when federal revenues rose above 18% of GDP.

That kind of tax burden is unusual. More importantly, it would not have been the result of an economic boom or an unusual spike in capital gains. It would have been the direct result of Washington allowing a sweeping tax increase to take effect.

Other Painful Tax Years Were Different

There have been other bad tax years, but this would have stood out even against that history.

In 2013, Congress allowed a partial expiration of the George W. Bush-era tax cuts. That was harmful, but most taxpayers were spared direct income tax increases. A full expiration of the 2017 Tax Cuts and Jobs Act’s family and business tax relief would have gone much further.

In 2000, federal revenues climbed to 20% of GDP, but that surge came from the late-1990s stock market boom rather than a major new tax hike. In 2022, revenues also rose sharply, but that was driven by unusually high capital gains realizations and high inflation.

The 1993 Clinton tax hikes were significant, but still smaller than the full expiration that was on the table here. The bracket-creep years of the late 1970s and early 1980s hurt taxpayers too, but that pain built gradually as inflation pushed workers into higher brackets. Even the Johnson surtax tied to the Vietnam War was temporary. What Congress just prevented would have been broad, sharp, and permanent.

Why It Matters

Tax policy matters because it shapes what families keep and what businesses can invest. A sudden tax increase of this size would have reduced take-home pay, tightened household budgets, and made it harder for businesses to plan, hire, and grow.

That is why preventing a tax hike matters just as much as passing a tax cut. Sometimes the most important policy victory is stopping Washington from making things worse.

The Working Families Tax Cuts did that. It preserved the core family and business tax relief first enacted in 2017 and prevented a major policy mistake from hitting all at once.

CFE Takeaway

Americans just dodged one of the biggest tax hikes in 75 years.

If the 2017 Tax Cuts and Jobs Act’s family and business tax relief had expired, this Tax Day would have come with the prospect of much higher tax burdens for families across the country. Instead, Congress acted before that happened. Preventing a tax increase this large may not attract the same attention as passing a new tax cut, but for taxpayers, the effect is just as important.