Everyone who is anyone in the conservative ranks these days loves to reference Ronald Reagan as the man who brought fiscal restraint and responsibility to government. He was the creator of Supply Side Economics and lower tax rates. He is often (by these same people) given credit as the man who pulled America out from one of the largest recessions since the great depression.
On the flip side, everyone who is anyone in the liberal ranks these days loves to reference Ronald Reagan as the man who gave tax cuts to the rich, increased income inequality, and was the benefactor of a business cycle that was on the way out of a recession.
These two themes mentioned have saturated the airwaves and newspapers on a daily basis for so long that younger people, older people, and even our politicians no longer feel the need to look into the facts.
After all, if you read it in a newspaper and hear it on the news it must be true right?
So the question remains, what did Ronald Reagan actually do to earn such critical acclaim from both sides of the aisle?
Let’s take a look. The first table represents the tax cuts during his administration. The Economic Recovery Tax Act of 1981 was clearly the largest tax cut of them all. In fact, that act alone was the single largest tax cut in history.
|
Tax Cuts
|
Billions of Dollars
|
|
Economic Recovery Tax Act of 1981
|
-264.4
|
|
Interest and Dividends Tax Compliance Act of 1983
|
-1.8
|
|
Federal Employees’ Retirement System Act of 1986
|
-0.2
|
|
Tax Reform Act of 1986
|
-8.9
|
|
Total cumulative tax cuts
|
-275.3
|
Further detail into these tax cuts would show that tax rates dropped from 70% to 28%, tax incentives were added for businesses, and regulations were reduced. These details, coincidentally, are the same talking points that we have grown to “know” over the last 30 years.
However, there is also a side of the story that is less heard of…tax increases. With increasing deficits, in large part due to the tax cuts, Reagan’s hand was forced to increase taxes as well in order to alleviate some of the deficit burden. In 1982, just one year after giving the biggest tax cut in history, he signed into law one of the largest tax increases in history with the Tax Equity and Fiscal Responsibility Act of 1982. This act took back lucrative tax breaks, and raised taxes on cigarettes among other items.
|
Tax Increases
|
Billions of Dollars
|
|
Tax Equity and Fiscal Responsibility Act of 1982
|
+57.3
|
|
Highway Revenue Act of 1982
|
+4.9
|
|
Social Security Amendments of 1983
|
+24.6
|
|
Railroad Retirement Revenue Act of 1983
|
+1.2
|
|
Deficit Reduction Act of 1984
|
+25.4
|
|
Consolidated Omnibus Budget Reconciliation Act of 1985
|
+2.9
|
|
Omnibus Budget Reconciliation Act of 1985
|
+2.4
|
|
Superfund Amendments and Reauthorization Act of 1986
|
+0.6
|
|
Continuing Resolution for 1987
|
+2.8
|
|
Omnibus Budget Reconciliation Act of 1987
|
+8.6
|
|
Continuing Resolution for 1988
|
+2.0
|
|
Total cumulative tax increases
|
+132.7
|
During his 8 years in office, he did provide a net decrease in tax revenues, this is probably why there are some who like to consider him the Godfather of Tax Cuts and even more in congress who are standing strong to their ‘Reaganesque’ style principles by vowing not to increase taxes under any circumstances. What they don’t realize is that they are not even abiding by the same set of principles as the man that they are trying to idolize.
You see Reagan knew how to compromise. Reagan knew that negotiating with the other party is necessary. Contrary to popular belief, Reagan knew that an increase in taxes is sometimes necessary even if it totally contradicted his brand new economic theory.
These facts are all too often lost in translation, but I believe that this is the story that should be told to our politicians, this is the story that people should remember about Reagan…
Don’t believe me though, do your own research.
Some info from:
http://www.ritholtz.com/blog/2010/09/reagan-tax-increases/
http://money.cnn.com/2010/09/08/news/economy/reagan_years_taxes/index.htm
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armchairpolitics1 