doublegunshop.com - home Forums Ken Burn's Teddy R.

Craig....You seem to have taken the passage above entirely out of context though I'm sure you meant no offence.

Craig, " Maybe he's probably", is an example of how it's hard to know what you mean....

....he makes it perfectly clear that he isn't speaking for anyone other than himself....

No, that is not the issue. He cut individual and corporate taxes, which resulted in investment, innovation, job growth, and increased consumer spending. As a result, more people were paying taxes, and also making more money. That doesn't mean he took more tax money from YOU, it means he created more tax payers in each income bracket. It's a pretty disingenuous argument to allege that the result was an increase in taxes. It's not hard to understand unless you are simply pursuing a different agenda which relies on intellectual dishonesty. That appears to be your intent. Splitting hairs for a dishonest purpose.

Soon after taking office in 1981, Reagan signed into law one of the largest tax cuts in the postwar period. (True)

That legislation -- phased in over three years -- pushed through a 23% across-the-board cut of individual income tax rates. It also called for tax brackets, the standard deduction and personal exemptions to be adjusted for inflation starting in 1984. That would reduce "bracket creep" since the high inflation of the 1970s and early 1980s meant incomes rose very fast, pushing taxpayers into ever higher brackets even though the real value of their income hadn't changed.

The 1981 bill also made certain business deductions more generous.

In 1986, Reagan lowered individual income tax rates again, this time in landmark tax reform legislation.

As a result of the 1981 and 1986 bills, the top income tax rate was slashed from 70% to 28%.

Despite the aggressive tax cutting, Reagan couldn't ignore the budget deficit, which was burgeoning.

After Reagan's first year in office, the annual deficit was 2.6% of gross domestic product. But it hit a high of 6% in 1983, stayed in the 5% range for the next three years, and fell to 3.1% by 1988. (By comparison, this year it's projected to be 9% but is expected to drop considerably thereafter.)

So, despite his public opposition to higher taxes, Reagan ended up signing off on several measures intended to raise more revenue.

"Reagan was certainly a tax cutter legislatively, emotionally and ideologically. But for a variety of political reasons, it was hard for him to ignore the cost of his tax cuts," said tax historian Joseph Thorndike.

Two bills passed in 1982 and 1984 together "constituted the biggest tax increase ever enacted during peacetime," Thorndike said.

The bills didn't raise more revenue by hiking individual income tax rates though. Instead they did it largely through making it tougher to evade taxes, and through "base broadening" -- that is, reducing various federal tax breaks and closing tax loopholes.

For instance, more asset sales became taxable and tax-advantaged contributions and benefits under pension plans were further limited.

"What people forget about Ronald Reagan was that he very much converted to base broadening as a means of reducing deficits and as a means of tax reform," said Eugene Steuerle, an Institute Fellow at the Urban Institute who had helped lay the groundwork for tax reform in 1986 and served as a deputy assistant Treasury secretary during Reagan's second term.

There were other notable tax increases under Reagan.

In 1983, for example, he signed off on Social Security reform legislation that, among other things, accelerated an increase in the payroll tax rate, required that higher-income beneficiaries pay income tax on part of their benefits, and required the self-employed to pay the full payroll tax rate, rather than just the portion normally paid by employees.

The tax reform of 1986, meanwhile, wasn't designed to increase federal tax revenue. But that didn't mean that no one's taxes went up. Because the reform bill eliminated or reduced many tax breaks and shelters, high-income tax filers who previously paid little ended up with bigger tax bills.


"Some of these taxpayers were substantial contributors to the Republican Party and to the president's re-election campaign, and had direct access to the White House. Reagan rebuffed their pleas," wrote J. Roger Mentz, the Treasury assistant secretary for tax policy in 1986, in a Tax Notes commentary last year.

All told, the tax increases Reagan approved ended up canceling out much of the reduction in tax revenue that resulted from his 1981 legislation.

Annual federal tax receipts during his presidency averaged 18.2% of GDP...a smidge above the 40-year average today.

How might Reagan fare today?
Reagan's behavior might not pass muster with those voters today who insist their Congressmen treat every proposed tax increase as poisonous to the republic.

"By today's standards, the Gipper would easily qualify for status as a back-stabbing, treacherous RINO [Republican in Name Only]," wrote Tax Analysts contributing editor Martin Sullivan, in an article for Tax Notes in May.

Thanks in part to the increases in defense spending during his administration, Reagan also didn't really reduce the size of government. Annual spending averaged 22.4% of GDP on his watch, which is above today's 40-year average of 20.7%, and above the 20.8% average under Carter.

Indeed, in one very symbolic respect he enlarged it. While in the early years of his presidency Reagan tried to shrink the IRS, by the end, the number of IRS employees hit an all-time high, according to Steuerle in his book Contemporary U.S. Tax Policy.

The reason was two-fold, Steuerle said. The first was a desire to crack down on the proliferation of tax shelters. But the point of cracking down was to boost tax revenue. That, in turn, could reduce the need to impose other tax increases to combat budget deficits.

It�s not hard to find the source of this story � Reagan�s own memoir, �An American Life.� Here�s what he wrote: �I made a deal with the congressional Democrats in 1982, agreeing to support a limited loophole-closing tax increase to raise more than $98.3 billion over three years in return for their agreement to cut spending by $280 billion during the same period; later the Democrats reneged on their pledge and we never got those cuts.�
When Reagan made a nationally-televised speech in support of the tax hike � trying to refute charges that it was the biggest tax increase in U.S. history � he also cited a 3-to-1 agreement:
�Revenues would increase over a three-year period by about $99 billion, and outlays in that same period would be reduced by $280 billion. Now, as you can see, that figures out to about a 3-to-1 ratio � $3 less in spending outlays for each $1 of increased revenue. This compromise adds up to a total over three years of a $380 billion reduction in the budget deficits.�

Despite Reagan�s claim that he made a deal with the Democrats, the Senate at the time was controlled by Republicans. Sen. Bob Dole of Kansas � then chairman of the Finance Committee and later the majority leader and Republican nominee for president � was a driving force behind a big tax increase because he was concerned about soaring deficits after Reagan had boosted defense spending and slashed taxes.

Before looking at taxation under Reagan, we must note that spending is the better indicator of the size of the government. If government cuts taxes, but not spending, it still gets the money from somewhere�either by borrowing or inflating. Either method robs the productive sector. Although spending is the better indicator, it is not complete, because it ignores other ways in which the government deprives producers of wealth. For instance, it conceals regulation and trade restricdons, which may require little government outlay.

If we look at government revenues as a percentage of "national income," we find little change from the Carter days, despite heralded "tax cuts." In 1980, revenues were 25.1% of "national income." In the first quarter of 1988 they were 24.7%.

Reagan came into office proposing to cut personal income and business taxes. The Economic Recovery Act was supposed to reduce revenues by $749 billion over five years. But this was quickly reversed with the Tax Equity and Fiscal Responsibility Act of 1982. TEFRA�the largest tax increase in American history�was designed to raise $214.1 billion over five years, and took back many of the business tax savings enacted the year before. It also imposed withholding on interest and dividends, a provision later repealed over the president's objection.

But this was just the beginning. In 1982 Reagan supported a five-cent-per-gallon gasoline tax and higher taxes on the trucking industry. Total increase: $5.5 billion a year. In 1983, on the recommendation of his Spcial Security Commission� chaired by the man he later made Fed chairman, Alan Green-span�Reagan called for, and received, Social Security tax increases of $165 billion over seven years. A year later came Reagan's Deficit Reduction Act to raise $50 billion.

Even the heralded Tax Reform Act of 1986 is more deception than substance. It shifted $120 billion over five years from visible personal income taxes to hidden business taxes. It lowered the rates, but it also repealed or reduced many deductions.

According to the Treasury Department, the 1981 tax cut will have reduced revenues by $1.48 trillion by the end of fiscal 1989. But tax increases since 1982 will equal $1.5 trillion by 1989. The increases include not only the formal legislation mentioned above but also bracket creep (which ended in 1985 when tax indexing took effect�a provision of the 1981 act despite Reagan's objection), $30 billion in various tax changes, and other increases. Taxes by the end of the Reagan era will be as large a chunk of GNP as when he took office, if not larger: 19.4%, by ultra-conservative estimate of the Reagan Office of Management and Budget. The so-called historic average is 18.3%.

Interesting points, but it's all irrelevant (your word) to virtually everyone but you. Reagan's economic policies worked. Since the House was controlled by Democrats the whole time he was in office, he had to compromise in order for his overall economic plan to be passed. As I recall, there were supposed to be real cuts in spending as well, but, due to the Democrats, they never happened. I daresay that tax increases were not Reagan's ideas, but were put forth by the Democrats. It's a credit to Reagan that he was successful at all. Now, what is your point? That some people's taxes were raised? Yes they were, but I suggest you're blaming the wrong person.

(David) Stockman, in his memoir, �The Triumph of Politics,� blames the late Rep. Jack Kemp (R-N.Y.) � later Dole�s vice presidential running mate � for convincing Reagan that he had been �hornswoggled� by Congress. By Stockman�s accounting, Congress did reasonably well in meeting the terms of the deal, but the administration failed to live up to its end of the bargain. �Reagan did get tricked � mainly by Weinberger and his own Cabinet,� Stockman said this week.
Dole felt compelled to send Reagan a letter on Jan. 16, 1984, clarifying what had actually happened:
The most frequently voiced objections to packaging new spending cuts and revenue increases together is that Congress would enact the new taxes but renege on the spending cuts. These critics cite as evidence the alleged failure of Congress in 1982 to deliver any of the promised three dollars in spending cuts for each dollar of tax increase. I respectfully submit, Mr. President, that you were not �taken in� by this budget plan.
In fact, historical budget data show that Congress did reduce spending. From 1982 to 1983, nondefense discretionary spending fell from 4.3 percent to 4.2 percent of the overall economy (gross domestic product) � and then kept falling until it reached 3.4 percent of GDP in 1989. Defense spending kept going up until 1986.