Reagan's Tax Record

Reader comment on: Obama and Reagan

Submitted by Jerry Skurnik (United States), May 17, 2012 17:25

http://capitalgainsandgames.com/blog/bruce-bartlett/2154/reagans-forgotten-tax-record

Almost immediately upon enactment of the 1981 tax cut, Reagan came under enormous pressure to do something about the federal budget deficit. While his preferred approach was to cut spending as much as necessary, it was not politically possible to so. His aides began pressuring him to support a tax increase. Conservative activists were appalled that Reagan would even consider such a thing, but he eventually endorsed the Tax Equity and Fiscal Responsibility Act of 1982. According to a Treasury Department analysis, it raised taxes by close to one percent of GDP, equivalent to $150 billion per year today, and was probably the largest peacetime tax increase in American history.[11]

This was just the first of many tax increases that President Reagan endorsed and signed into law. There were 11 major tax increases during his administration. And this doesn't count the fact that Reagan intentionally delayed the start of tax indexing, which was part of the 1981 tax bill, until 1985 so as to capture a lot of anticipated bracket-creep for the Treasury. In fact, it was the failure of inflation to come in as fast as White House economists expected that created much of the deficit problem. I estimate that lower than expected inflation and the loss of bracket creep was responsible for about half the budget deficit in 1981 and 1982.[12] It's also worth noting that the Tax Reform Act of 1986, which was revenue-neutral in the long run, was a fairly substantial revenue-raiser its first year, increasing taxes by $18.6 billion or 0.41 percent of GDP.[13]


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