What Would Reagan Do (WWRD)?
Ironically, not cut taxes as much as President Obama is proposing!
Here鈥檚 an , citing several tax policy experts who explain that quite contrary to Reagan鈥檚 reputation, he actually signed into law what amounted to the 鈥渓argest tax increase in (peacetime) American history鈥濃�搖pon realizing that our country couldn鈥檛 really afford the largest tax cuts that had he put in place earlier in his Administration. But the Reagan Administration鈥檚 tax increases were large in terms of revenue gains, not in terms of marginal tax rates, because they did it the smart way: by reforming the tax system to make the tax base broader and more efficient. (Pssst: they accomplished this with a good deal of bipartisanship.)
From Jeanne鈥檚 story (emphasis added):
鈥淩eagan 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,鈥� said tax historian Joseph Thorndike.
Two bills passed in 1982 and 1984 together 鈥渃onstituted the biggest tax increase ever enacted during peacetime,鈥� Thorndike said.
The bills didn鈥檛 raise more revenue by hiking individual income tax rates though. Instead they did it largely through making it tougher to evade taxes, and through 鈥渂ase broadening鈥� 鈥� that is, reducing various federal tax breaks and closing tax loopholes鈥�
鈥淲hat 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,鈥� 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鈥檚 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鈥檛 designed to increase federal tax revenue. But that didn鈥檛 mean that no one鈥檚 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鈥�
All told, the tax increases Reagan approved ended up canceling out much of the reduction in tax revenue that resulted from his 1981 legislation.
Was this a politically-easy thing to do? Probably not, but it was at least easier for a strong leader like Reagan back then, than it would be for an equally strong leader today. Jeanne quotes Marty Sullivan:
鈥淏y 迟辞诲补测鈥檚 standards, the Gipper would easily qualify for status as a back-stabbing, treacherous RINO [Republican in Name Only],鈥� wrote Tax Analysts contributing editor Martin Sullivan, in an article for Tax Notes in May.
Kind of ironic how President Obama鈥檚 current position on tax policy seems more in keeping with the ideals of at least 迟辞诲补测鈥檚 Republican party than would Reagan tax policies brought forward to today.
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