What Happens If the Big Beautiful Bill Act Fails? The Answer May Surprise You
Former Global Chief Economist for JPMorgan Chase (Ph.D. in Economics) & Current Global Keynote Speaker
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In today’s highly charged political environment, it can be challenging to cut through the noise and assess the true economic implications of a significant piece of legislation. The so-called Big Beautiful Bill Act, currently under debate in Washington, has sparked wide-ranging claims about what could happen if it is not passed in its current form. Among the more dramatic assertions is that its failure would result in a “68% tax increase”—a claim that, upon closer nonpartisan examination, reveals the actual increase is 7.5%. Additional nonpartisan fact-checking analysis by the Tax Foundation also confirms that the average increase would be 7.5%.
Given these findings, we explore the implications for the broader U.S. economy, compare them with previous historical tax increases, and address the added fiscal pressures from increased tariff collections on imports, especially if the Senate does not ratify the Big Beautiful Bill Act. Nevertheless, we anticipate that with some adjustments, the bill will pass in the Senate, be ratified by the House of Representatives, and ultimately be signed by the President.
Still, the idea that Americans would face a 68% tax increase if the bill isn’t passed has gained traction in public discourse. The correct figure is that 68% of U.S. taxpayers would encounter increases in their tax bill, and the magnitude of the increase would vary by income level and other factors.
This distinction matters. Eye-catching but inaccurate numbers can easily skew public debate. A 68% increase in tax liability would be unprecedented and economically destabilizing; a 7.5% average increase, while certainly impactful, fits within the bounds of historical experience.
Historical Context: A Closer Examination of the 1993 and 2013 Tax Increases
To better understand what a 7.5% increase would mean for the economy, we can look to past examples. Two of the more recent and widely analyzed tax hikes occurred in 1993 and 2013:
1993 Omnibus Budget Reconciliation Act: This legislation resulted in a 4.8% increase in federal tax revenue over the following 12 months. While controversial, it coincided with an economic expansion throughout the mid-to-late 1990s.
2013 American Taxpayer Relief Act: In the 12 months following its enactment, federal tax revenues rose by 13% according to an annual report prepared for Congress by the Taxpayer Advocate Service (TAS). However, a nonpartisan review of the evidence indicated that not all of that increase could be attributed solely to tax policy; a portion originated from the outcomes of a growing economy following the implementation of tax increases.
Tariffs: The Silent Reinforcer
In addition to tax increases, another source of fiscal drag would come from tariff revenues. The U.S. currently collects tariffs on over $3.1 trillion in annual imports. These tariffs (if import demand is inelastic, and volumes remain unchanged when tariffs are imposed) would primarily be absorbed by businesses or passed along to consumers in the form of higher prices.
Assuming the average effective tariff rate is between 15% and 16% (up from around 3.0% before Liberation Day), we estimate that the annual federal tax revenues will range from $465 billion to $496 billion over 12 months. As of June 2025, the nonpartisan Yale Budget Lab estimates that effective U.S. tariff rates stand at 15.6%. Combined with the 7.5% increase in direct taxes if the Big Beautiful Bill Act is not enacted, tariffs would magnify the overall fiscal drag on the U.S. economy.
The drag would be worsened if it occurred during a time of slowing U.S. economic growth. As we have noted in previous analyses, the White House is demanding an immediate rate cut of 200 basis points to counteract an impending weakening of the U.S. economy.
Here’s how this could play out:
Consumer Spending: Households facing higher tax bills and import-driven price hikes may reduce discretionary spending, leading to slower growth in retail, entertainment, and travel sectors.
Business Investment: Firms may delay or cancel planned investments due to higher after-tax costs, particularly if depreciation incentives or expensing provisions are rolled back.
Labor Market: Employers might slow hiring or reduce hours in response to tighter profit margins, especially in industries that rely on imported inputs or have narrow operating margins.
Summary and Concluding Thoughts
Will taxes increase by 68% if the bill fails? No. That number refers to the percentage of people affected, not the size of the increase.
Is a 7.5% tax increase significant? Yes, especially when coupled with tariffs and macroeconomic uncertainties.
Is there historical precedent for tax increases of this scale? Yes—both 1993 and 2013 saw comparable or larger revenue increases, though outcomes varied depending on the broader economic environment.
Will tariffs exacerbate the effects of tax increases? Yes, it can slow economic growth and lead to price increases that negatively impact both businesses and consumers.
Decisions regarding tax policy and trade measures have a ripple effect across every sector, affecting consumers, businesses, and government finances. While political rhetoric may focus on slogans and shock-value statistics, nonpartisan analysis emphasizes the economic implications without passing judgment on the merits of the legislation.
Coupled with the contractionary effects of rising tariffs, the overall fiscal drag could hinder consumer spending, dampen business investment, and negatively impact U.S. GDP growth.
Whether one supports or opposes the bill, if it is not enacted and tariffs remain in place, the economy is likely to weaken in 2026.