Candidates Channeling Reagan Don’t Talk About His Tax Increases

Candidates Channeling Reagan Don’t Talk About His Tax
Then-President Ronald Reagan speaks at a political rally in Greensboro, North Carolina, in this June 4, 1986 photo. Source: Ronald Reagan Library/via Bloomberg

Republicans seeking their party’s 2012 presidential nomination are invoking Ronald Reagan when conveying their message of small government and low taxes.

Reagan championed tax cuts. He also agreed to raise taxes 11 times during his presidency from January 1981 to January 1989, tax historians say.

While it’s impossible to know how Reagan would have adapted to today’s strict no-new-tax Republican stance, the Reagan of the 1980s “would be run out of the party. He’d be to the left of the left-most candidate in the primary,” tax historian Joseph Thorndike told Bloomberg Government.

Reagan pushed Congress to pass a $275 billion individual and business tax cut in 1981 and took back about half of it during his two terms in the White House with subsequent tax increases, said Bruce Bartlett, a columnist for Tax Notes who was a senior policy analyst in the Reagan administration.

“Except for the ‘81 tax cut, he raised taxes nearly every year he was in office, 11 times in all,” Bartlett said in a telephone interview.

That contrasts somewhat with the Reagan who had “a vision of limited government” Representative Michele Bachmann of Minnesota, a Republican presidential candidate, referred to in a Sept. 23 address to the Conservative Political Action Conference in Orlando, Florida.

Evoking Reagan

Other Republican candidates have referred to Reagan’s quest for limited government. In June Jon Huntsman Jr., the former Utah governor and ambassador to China in the Obama administration, kicked off his run for the Republican presidential nomination in the same New Jersey park where Reagan announced his 1980 campaign. Huntsman said Reagan “assured us we could ‘make America great again,’ and through his leadership, he did.”

When it came to taxes, Reagan raised them almost as much as he cut them during his tenure in the White House.

Receipts under the tax rate structure before Reagan’s 1981 tax cut would have yielded $1.17 trillion if left in place until Jan. 1, 1990. That compares with $1.05 trillion raised by the tax system during that decade, according to the data, published in the “The Tax Decade,” a study of tax policy during the 1980s by Eugene Steuerle, a senior Treasury Department official during the Reagan administration.

Steuerle said Reagan was intent on lowering individual tax rates and “he paid for a lot of that by allowing tax breaks to be cut or pared back.”

‘Base Broadening’

“We did more base broadening under Ronald Reagan than we did under any other president in the history of the tax code,” Steuerle, now a fellow at the non-partisan, Washington-based Urban Institute, said in a phone interview.

Reagan’s 1981 tax cut reduced the top individual tax rate from 70 percent to 50 percent.

Reagan took back more than one-quarter of the 1981 tax cut by signing off on tax-code changes in 1982 and 1984 that raised revenue largely by eliminating tax breaks, according to data compiled by Bartlett. The 1982 measure, which increased taxes by $57.3 billion, was probably the largest peacetime tax increase in U.S. history, he said.

Reagan’s willingness to raise taxes stemmed from his administration’s concern about the federal budget deficit, said Thorndike, a visiting scholar in history at the University of Virginia and a columnist for Tax Notes, a trade publication from the non-partisan Tax Analysts.

‘Saw the Necessity’

“His heart was clearly with the lower rates, but he and his administration saw the necessity of raising enough revenue to not run huge deficits,” Thorndike said.

Reagan in 1983 enacted an increase in the payroll tax that funds Social Security, and he endorsed requiring higher-income recipients to pay taxes on their benefits.

He presided over the landmark Tax Reform Act of 1986, which further knocked down top individual tax rates, to 28 percent. That reduction was achieved largely by curbing and eliminating business tax breaks and by raising the rate for capital gains.

There were limits to Reagan’s appetite for lower rates, something President Barack Obama noted in a fundraising speech on Oct. 4. In making his call for tax increases for high earners, Obama quoted Reagan criticizing tax breaks that “made it possible for millionaires to pay nothing while a bus driver was paying 10 percent of his salary, and that’s crazy.”

“Reagan, if anything, is more aroused by issues of tax equity than he is by rate reduction,” historian W. Elliott Brownlee, co-editor of The Reagan Presidency: Pragmatic Conservatism and Its Legacies, said in a phone interview.

Reagan’s pursuit of tax fairness is overlooked by the current crop of Republican presidential candidates, Brownlee said. “I believe they’ve lost sight of it,” he said.

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