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When Reagan Raised Taxes

By Kelly Thomas - Posted on 10 May 2011

I know we have had much discussion on the legacy of President Ronald Reagan here at RFO. I find it very interesting that conservatives, who often hold up Reagan as a role model, often leave out important parts of his biography such as some of his "liberal" positions and the fact that he raised taxes. Yes, Ronald Reagan raised taxes and it was a GOOD thing, not some evil, socialist endeavor.

As Republicans step up the debate on the debt ceiling and deficit and even demand "trillions" in spending cuts, will they finally acknowledge that we simply can't address the deficit without looking at the revenue side of things? Too bad Reagan isn't alive to give them some good advice. Perhaps they can read this article from CNN to get some perspective and a reality check.

Sen. Tom Coburn, a staunch conservative from Oklahoma, triggered a heated debate among conservatives when he acknowledged that tax increases might be necessary if Congress really wants to reduce the deficit.

On "Meet the Press," Coburn said that he might support tax reform even if the loophole closing ended up increasing the tax burden of some Americans.

...During Reagan's his first year as president, he demonstrated his commitment to conservative principles by pushing through Congress a historic tax reduction in 1981 that brought rates to their lowest level since World War II. Although Democrats initially opposed the tax cuts as an irresponsible act that would provide huge benefits to the wealthiest Americans, the administration won over Democratic support in the House by allowing them to attach all sorts of provisions like increasing the child care credit.

But soon after, a more pragmatic side of the president was revealed. When Reagan dramatically increased the size of the defense budget and failed to curb domestic spending, the size of the federal deficit started to skyrocket. Some Senate Republicans, including Majority Leader Robert Dole, started to apply pressure on the White House to raise taxes. House Democrats insisted that they would not cut spending unless Reagan dealt with the tax side of the fiscal ledger.

The president, who was unhappy about raising taxes and who realized that it would cause anger on the right, agreed to support Dole. This wasn't a surprise for anyone who knew Reagan's record. As governor of California, Reagan had agreed to the largest tax increase in the state's history to deal with the $200 million deficit.

In private meetings with legislators in 1982, Reagan argued that tax increases were needed to lower the deficit and win over enough Democratic support in the House to pass spending cuts. The president, according to Sen. Howard Baker, proclaimed "without any equivocation his total support" for the tax bill. During a tense meeting with members of the House, New York Rep. Jack Kemp, who had joined a group of conservatives fighting against the tax bill, bluntly told the president the bill was a poor idea.

Reagan responded that if the congressman desired more domestic spending cuts, he would have to support the tax increase in order to get sufficient Democratic votes. When Kemp warned Reagan that he should not be a "leader of a minority within a minority," (Kemp argued that even most Democrats were not calling for tax increase) the congressman was "taken to the woodshed" by the president according to one unidentified staffer in attendance, the Los Angeles Times reported.

In August, Reagan signed the Tax Equity and Fiscal Responsibility Act, which increased taxes on business and added new excise taxes on tobacco and alcohol and other goods. Reagan made the same kind of choice the next year. In 1983, as part of an agreement to shore up the short-term fiscal stability of Social Security, Reagan did it again when he agreed to legislation that increased payroll taxes.

During his second term, Treasury and Congress tackled the thorny issue of tax reform. Proponents argued that tax reform was necessary to make the system more economically efficient and fair. The Tax Reform of 1986 simplified the rate structure and closed many loopholes. It remained revenue neutral by lowering rates in exchange for the loopholes that were eliminated. But as a result of the bill, many interests were hit with higher taxes. Reagan stood behind the measure and was instrumental to its passage.

In the end, Reagan survived these decisions politically. Although many conservatives complained at the time, Reagan won bipartisan support. He displayed a type of political flexibility and pragmatism that allowed him to build a domestic record in a Washington where power was divided between the two parties and where not all Republicans agreed that unlimited tax cuts were a good thing for the nation.

Many of today's Republicans are proving to be much more ideologically rigid than their icon Ronald Reagan. Norquist is castigating and isolating a staunch conservative for saying what is rather obvious -- deficit reduction can't actually happen without raising taxes given that there are political and practical limitations to how much of government can be eliminated. Most of the major plans to come from the GOP have simply ignored this reality. Or others, like Paul Ryan, have obfuscated the fact that their plans would require tax increases on the middle class through tax reform.

We'll learn whether Republicans are serious about deficit reduction when they are faced with deciding on tax increases. The ultimate response of the GOP to the debate over Coburn's comments will reveal whether fiscal conservatism is really integral to the party or whether it is primarily rhetoric used to justify large reductions in the welfare state.

This article is obviously incorrect, and clearly written by an unapologetic liberal. Reagan was a conservative. His entire domestic agenda was about cutting taxes, and nothing else.
LOL. I better report the writer of the article to the highest conservative authorities. Who shall I start with-Rush Limbaugh? Maybe he was under the influence of fact-checks while writing.

It just proves that even "idealogues" have to be pragmatic when the situation requires. The primary GOP mantra of "cut taxes no matter what the overall exconomic situation" has been proven again to be false.

The GOP playbook needs to be completely re-written, or at least a major editing is in order.

These people sap my energy, I'll be honest. They can't accept the fact that there used to be a time when adjusting tax rates didn't automatically get you branded a socialist. Reagan raised one tax or another during most of his years in office. He didn't want taxes to be raised (as I don't want taxes to be raised, and as 95% of the American population don't want taxes to be raised), but there are more important things out there to worry about than wether so-and-so multi-billionaire pays 28% marginal rates or 29% marginal rates on his earnings.

Republicans have been phobic about taxes since GHW Bush said "read my lips; no new taxes," then raised taxes and lost the election.  Sometimes, they raise "fees," but they're adamantly against any taxes even though sometimes just a miniscule increase would result in substantial revenue.

Good topic, Kelly, and definitely something I fight here at the office when my co-workers - who are very knowledgeable folks, ordinarily - start misquoting or "selectively remembering" Reagan's tax policy.  Shame when political dogma gets in the way of facts.

On another topic (but still related to taxes), here's an interesting graphic depiction of corporate taxation and loopholes.  I'll quote the top part of the graphic, which is eye-opening:

"In the 1950's, corporate taxes accounted for 30% of federal revenue.  Nowadays, they account for just 6.6%."


"In the 1950's, corporate taxes accounted for 30% of federal revenue. Nowadays, they account for just 6.6%."

And, guess who makes up for the majority of that 23.4% difference. The "former" middle class. I say "former" because many in the middle class have been pushed into the "lower class" (the caste system in India would be proud).

A shout out to Newt G for the quote of the day, on Meet the Press this morning (actually, a clip of him from 1990, when memories of Reagan were still a little more realistic):

First of all, Ronald Reagan did a lot of things that conservatives didn’t like.  And I think it’s a little bit much to go back and say that was Camelot, that that was an era of pure conservatism.  George Bush [Sr.] isn’t as good as Reagan was at making speeches on the right while governing in the center, but the fact is, that’s what Ronald Reagan did.

Great quote. Imagine-Newt Gingrich bringing the truth home...guess that means he is toast, huh? How dare he ruin the fantasy of Reagan with annoying facts!

If I'm not mistaken, Ronald Reagan was the last President to raise social security taxes.  Ronald Reagan knew how important it was to save social security.  Could you imagine going through the financial crisis without social security?  I shudder to think about it.  

Great point.

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