Tax Cuts and Jobs Act (2017)

The Tax Cuts and Jobs Act was the largest overhaul of the federal tax code since 1986. It permanently cut the corporate tax rate from 35 to 21 percent and temporarily lowered individual rates through 2025.

Signed by President Trump in December 2017, the Tax Cuts and Jobs Act was the signature legislative achievement of his first term. The bill cut the corporate income tax rate from 35 percent to 21 percent, the largest single reduction in the corporate rate in American history. Pass-through businesses received a new 20 percent deduction on qualified business income. The standard deduction nearly doubled, simplifying filing for most households. Individual rates fell modestly across the board. Some popular deductions, including the deduction for state and local taxes, were capped at $10,000, a change that hit high-tax states hardest. The child tax credit doubled. The estate tax exemption was raised. The bill drew heavily on supply-side reasoning, arguing that lower corporate rates would bring investment home from abroad and spur wage growth. Most individual provisions were set to expire at the end of 2025, while the corporate cut was made permanent. The bill was passed on party lines through the budget reconciliation process. Supporters point to the strong pre-pandemic economy and a wave of corporate repatriation as evidence the cuts worked. Critics argue that the gains went disproportionately to capital, that the deficit ballooned, and that the temporary nature of the individual cuts was a setup for a future fiscal cliff. The scheduled 2025 expirations became a central battle of subsequent congresses.