OK, last post on this subject:

Bruce Bartlett wrote me to fill in the full Reagan tax story (recall he was a domestic policy adviser to Reagan and was in the Treasury under President George H.W. Bush). He notes that RR began with tax cuts during the recession, but took about half of them back before his term ended. (I’ll ask him about deficit spending for another post).

Bartlett writes that:

“Reagan signed into law the Tax Equity and Fiscal Responsibility Act in 1982 before the recession was even over and went on to sign 10 more major tax increases during his administration. By 1988 he had taken back half the 1981 tax cut. These tax increases were most enacted as part of budget deals that cut domestic discretionary spending. Compared to today’s Republicans, Reagan was a model of fiscal responsibility.”

He pointed me to this chart from his blog:

>

Legislated Tax Changes by Ronald Reagan as of 1988

Source: Office of Management and Budget, Budget of the United States Government, Fiscal Year 1990 (Washington: U.S. Government Printing Office, 1989), p. 4-4.

Category: Politics, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

32 Responses to “Reagan’s Tax Increases”

  1. Sircornflakes says:

    Reagan raised taxes? Sorry doesn’t fit the narrative.

    “Fingers in ears….la la la la la la la la la”

  2. Hacksaw says:

    Net effect was still a decrease in rates so in my mind it makes more sense to drop the rates below the intended long term rate initially if only to get business operating again. Wasn’t it the intention of the current stimulus to hit the gas on the front end to get the economy moving and then pulling on the reigns gradually to avoid fiscal disaster? I’d be interested to see the same table estimating the forward fiscal years between bush tax cut expiration, health care, and anything else that might be in the pipeline…

  3. Kort says:

    @cornflakes

    The narrative always had tax increases in them and removal of certain tax deductions (like credit card interest), so many, in fact, that GHWB said “no new taxes, read my lips” and then of course, as President, he put in new taxes and sayonara 1-termer.

  4. Wasn’t he also the one who sent tons of grain to the Soviets while at the same time calling them an evil empire and trying to BK them by out building competing weaponry? There appeared to be a lot of contradictions in that guy.

  5. Brett Tibbitts says:

    Why all the dwelling on Ronald Reagan? We are in a totally different situation today than when Ronald Reagan took office. Sure, perhaps, the debt increased under Reagan, but that is spilled milk.

    For better or worse, we can only deal with here and now. We can’t change history.

    Obama came into office with a much higher debt load than Reagan. So what? The mark of a true leader is to deal with the true crisis at hand, not his political agenda. Obama is choosing to pursue his political agenda come hell or high water. That is why he is losing support among the masses.

    A true leader would say and think, “Well, we have way too much debt and have made way too many promises we can’t keep. And we have major employment problems. Those are our biggest problems and they are bordering on catastrophic. I will put aside my agenda and solve these problems first.”

    Our next true leader, be it Obama or someone else, will realize this and take up the mantel.

  6. How the Common Man Sees It:
    Yeah. He also sold weapons to Saddam. To Iran in exchange for the hostages. Supported OBL and the rest of the “freedom fighters” in Afghanistan against the Soviet Union.

  7. olephart says:

    Let’s see, as I remember the tax cuts went to those in the upper incomes while the tax increases were on lower incomes. I’ll never forget a man I worked with who was a big Reagan supporter coming in after the 1986 tax reform crying about the extra $3,000 he had to pay. You see, even though it is listed as a tax cut the net effect was to raise taxes on middle incomes and lower then on the top. I was there, I filed returns. If you’re not rich whenever a Republican mentions taxes, grab your wallet with both hands.

  8. PDS says:

    BR….i thought the topic was deficits and debt???…on that note today, we passed the $1tril deficit mark 9mths into fiscal year…and despite the $800bil + stimulus and other fiscal party favors, Federal individual income tax receipts fell 4.4% over the same period last year….so far Mr Keynes strikes out in the great growth debate!!

    ~~~

    BR: Is it your position that the recession that began in December 2007, and the 15 million lost jobs had nothing to do with the decrease in income tax reciepts?

    Here, try this chart:


    Chart courtesy of zFacts.com

  9. Petey Wheatstraw says:

    We have a fiat currency. The only trend is inflation. Yes, there can be periods of perceived deflation in a credit/fiat monetary regime — in the lag time between debt creation and the money to settle that debt being created — but in the end, transient deflationary tendencies will lose out to the immutable and inherent tendency for fiat to inflate. TPTB are not going to let strong dollars come back to the US (when they do come home, they will be ISO tangible assets and raw materials, and not jobs or consumer products).

    Our big problem is how to get money into the hands of the indebted, in the face of rising, and what seems will be chronic, unemployment and shrinking wages.

    There is a very simple and elegant solution to this problem, but while it would allow a soft landing (at a real bottom, no less), those who make the rules stand to have their wealth minimized by inflation should it be enacted. Regardless of what those who have gamed the system want, when push comes to shove, the middle and lower classes will take what they need.

  10. The Curmudgeon says:

    Regardless of whatever else Reagan might have done, his greatest legacy is the dismantling of the Berlin Wall and the end of the Soviet Union. (Which I know, came shortly after his presidency, but it came as a result thereof). Our only existential threat crumbled before our eyes because we, through Reagan’s leadership, were able to prove that the freedom to make economic decisions without undue government interference creates vastly more wealth than is created by economic decision-making through bureaucratic fiat. Everything else he did, or is accused of doing, pales in comparison.

    The president’s first job is always and forevermore protecting the country from its existential threats, and Reagan did it marvelously and unapologetically.

    Sadly enough, it appears that we won the Cold War only to adopt, two decades later, many of the same tenets of economic governance followed by our former adversary, and I don’t just mean by the new Administration, but also by the one that preceded it.

    (Sorry BR, if I’m rattling the cages of the lizard brains.)

  11. Cdale_dog says:

    Petey Wheat,

    The middle and lower classes will take what they need alright, right up the poop chute……

    We couldn’t have any real inflation right now if you printed all the money in the world. NO JOBS is the problem. There is no way out of this mess without getting people back to work.

    I have an idea, why not embrace the Arizona law and take about 40,000 workers down to the California, New Mexico, Arizona and Texas borders and build a friggen double walled, Razor wire fence that will allow us to secure our borders once and for all. If the gubment wants to print a bunch of money to do it, so be it. At least you would have money getting into the hands of people who will spend it – all the while providing a very real and important benefit (border protection) to Americans.

    Then, why don’t you print some more money to rehab the inner cities so that those who live there can feel good about their environment. How about putting some money into rec leagues, work programs, blighted areas, etc. Stop talking about the problem, start fixing it.

    No, we are suing Arizona and we continue to watch the oil leak, all the while playing partisan politics and starting our re-election campaign. What a joke.

  12. sparrowsfall says:

    Here’s the difference between then and now: Reagan didn’t have the incoming debt burden that Obama did — courtesy of…Reagan.

    http://www.usgovernmentrevenue.com/downchart_gr.php?year=1940_2015&view=1&expand=&units=p&fy=fy11&chart=H0-fed&bar=0&stack=1&size=l&title=&state=US&color=c&local=s

    Note the inflection point: 1981.

    Reagan may have pulled back half of the tax cuts, as Bruce says. (It’s not clear from his table what fiscal years are being counted.) But his legacy has been a 30-year, nonstop binge of Keynesian stimulus gone wild — reversed, briefly, under Clinton.

    Obama’s stuck with paying the bills for three decades of profound fiscal malfeasance (visited upon us by hypocrytically self-proclaimed “fiscal conservatives”), healing an economy devastated by The Reaganomics Strategy.

    Which is:

    Borrow money from our children and from abroad to buy votes here with the world’s oldest political pander: “I’ll cut your taxes!”

    When Cheney said “Reagan proved that deficits don’t matter,” he was making a political statement, not an economic one. People (especially Republicans) love to self-righteously complain about deficits and debt, but they vote for the person who promises to cut their taxes. That strategy has been *spectacularly* successful for thirty years.

    Given that Democratic presidents are the only elected officials with the political courage to raise taxes to pay the bills…

    http://www.asymptosis.com/congress-presidents-spending-taxes-debt-gdp.html

    …it’s amazing that they manage to get elected ever, at all. Their policies must be remarkably popular.

  13. The Curmudgeon says:

    Really? The debt burden Obama inherited was caused by Reagan’s profligacy? Two decades earlier? Nothing happened in between, I suppose?

    Reagan borrowed money to win the Cold War. The peace dividend it generated was so great that Clinton was able to (wisely) retire a goodly portion of the accumulated debt. Whatever a Republican might think about Clinton’s personal ethics, he understood that the first principle of sound leadership is, like medicine, do no harm. George Bush, 43, squandered Reagan and Clinton’s legacy in the sands of Iraq, trying to show his daddy who was the bigger man, and then squandered it some more when he allowed the Federal Reserve and US Treasury to take de facto control of the country before the election. Obama inherited Bush’s mess, and what a mess it was. Bush was about as bad a president as that other Texan that occupied the Oval Office, and it took a whole decade to get over him.

    But what matters now is where Obama goes from here. If he tries to simply blame Bush (I don’t think he’d be so audacious as to seriously try to blame Reagan), he’ll end up as Carter II.

  14. sparrowsfall says:

    >The debt burden Obama inherited was caused by Reagan’s profligacy?

    It was caused by the legacy of Reaganomics and the rise of the Norquististas.

    The graph is unambiguous.

  15. Grunschev says:

    The Curmudgeon Says:
    July 13th, 2010 at 4:56 pm

    Regardless of whatever else Reagan might have done, his greatest legacy is the dismantling of the Berlin Wall and the end of the Soviet Union.
    ———————-

    Reagan had nothing to do with the fall of the Soviet Union. The USSR was doomed to failure from the start. It was a command economy with no incentives. Unless Reagan was an architect of that system, he had nothing to do with its demise.

    Further, he had absolutely nothing to do with the timing of said demise. Perhaps the two biggest impacts in the timing of the USSR’s ultimate failure were the war in Afghanistan (which was lost the day it began) and Chernobyl.

    Reagan’s legacy of great deeds is, for the most part, pure fiction.

  16. Cdale_dog says:

    Wow, the Obama kool-aid is flowing strong on the Big Picture today…..

    None of the current deficit is BHO’s fault or doing? Really? What was the national debt as a percentage of GDP when Bush left office and what is it now? Anyone care to guess?

    Just like Bush got blamed for the .dot com implossion, BHO is being blamed for the economy that has tanked under his watch. What’s good for the goose, is good for the gander. If you Obama fans can honestly say you didn’t blame GWB for the .dot com debacle, then you can cast a few stones. Otherwise, pipe down….

    ~~~

    BR: I sure as hell didn’t blame W for that.

    I am no fan of this administration, but I find the “blank sheet argument” — placing the entire blame for the deficit on the current crew — disingenuous and lacking in all context. When the current admin came into office, the recession was 14 months old, over 10 million jobs were already gone, and the Dow was under 8,000.

  17. napster says:

    Yea, Curmudgeon, seriously, do you really believe this statement:

    “Reagan borrowed money to win the Cold War.”

    Was this a conscious policy decision? How did the spending that necessitated the borrowing do anything to “win” the Cold War?

    Grundshev is correct.

    What was “winning” the Cold War? Was it : Winning the competition over the non-European World? If so, the Russians never had a chance and never really tried very hard. I’m assuming you know history.

    If you do not know your history, let me please advise you not to pretend otherwise, because I am a person who does know their history. In addition, I am a person who continuously, daily , updates, and updates that knowledge of history.

    So when I hear comments like “Reagan borrowed money to win the Cold War”, I come to the conclusion that either you threw out a thoughtless line as a metaphor, or you are juggling presumption and ignorance while thinking the action is erudition.

    If I didn’t have the spare time today, I wouldn’t bother to comment on this nonsense. But being sick, I am a little more sensitive to the ill informed pontificators who thinks to themselves they are contributing to the knowledge base of mankind.

  18. Thor says:

    Napster – Remind me never to get on your bad side ;-)

  19. Joe Friday says:

    BR wrote:

    “He notes that RR began with tax cuts during the recession”

    HUH ?

    “During” what “recession” ?

    The GDP was +4.9% in the QTR that Reagan signed the ERTA into law, and he had inherited a GDP of 8.6% in the 1ST QTR of 1981.

    The economy didn’t tank into recession until AFTER the tax cuts for the Rich & Corporate.

    ~~~

    BR: I was referencing the 1980 recession

  20. Lamont says:

    “By 1988 he had taken back half the 1981 tax cut. ”

    Looks like the author ignored the 1986 Tax REform Act which lowered the top rate from 50% down to 28%, a huge cut on the top rate compared to the George W tax cuts which brought it down from 39.6% to 35% only. That 1986 act also increased the mortgage interest deduction, though it took away the deduction for consumer loan interest. It also increased the personal exemption and standard deduction.

    ~~~

    BR: The reference wasn’t tot he rates; it was to the total dollar amount of tax cuts . . .

  21. It also took away deductions for student loans.

    For that reason alone, I always thought Reagan was a bastard . . .

  22. DAVID LEONHARDT says:

    How Trillion-Dollar Deficits Were Created
    http://www.ritholtz.com/blog/2009/06/how-trillion-dollar-deficits-were-created/

    The story of today’s deficits starts in January 2001, as President Bill Clinton was leaving office. The Congressional Budget Office estimated then that the government would run an average annual surplus of more than $800 billion a year from 2009 to 2012. Today, the government is expected to run a $1.2 trillion annual deficit in those years.

    You can think of that roughly $2 trillion swing as coming from four broad categories: the business cycle, President George W. Bush’s policies, policies from the Bush years that are scheduled to expire but that Mr. Obama has chosen to extend, and new policies proposed by Mr. Obama.

    The first category — the business cycle — accounts for 37 percent of the $2 trillion swing. It’s a reflection of the fact that both the 2001 recession and the current one reduced tax revenue, required more spending on safety-net programs and changed economists’ assumptions about how much in taxes the government would collect in future years.

    About 33 percent of the swing stems from new legislation signed by Mr. Bush. That legislation, like his tax cuts and the Medicare prescription drug benefit, not only continue to cost the government but have also increased interest payments on the national debt.

    Mr. Obama’s main contribution to the deficit is his extension of several Bush policies, like the Iraq war and tax cuts for households making less than $250,000. Such policies — together with the Wall Street bailout, which was signed by Mr. Bush and supported by Mr. Obama — account for 20 percent of the swing.

    About 7 percent comes from the stimulus bill that Mr. Obama signed in February. And only 3 percent comes from Mr. Obama’s agenda on health care, education, energy and other areas.

    If the analysis is extended further into the future, well beyond 2012, the Obama agenda accounts for only a slightly higher share of the projected deficits.

  23. Joe Friday says:

    “BR: I was referencing the 1980 recession”

    Still doesn’t compute.

    The ‘National Bureau of Economic Research’ declared the recession ended in July of 1980. Reagan signed the ERTA into law in August of 1981, more than a year later.

  24. Rescission says:

    Reagan was my hero. I was in college when he was President and we actually had a framed picture of him on our wall in our campus house. We were business majors and he was a real hero to young business majors. He inspired me to become an entrepreneur (when is the last time we had a real leader who did that?). He told us we could start our own businesses and I believed him. I have a friend who has her own Law Practice and she says she went out and did it because Reagan told her it could be done and encouraged it. I bet there are many more of us out there.

    You guys and criticize him and pick him apart, but I was there and remember the shitty condition we were in when he came into office. My wife car loan was at 17.5% (and that wasn’t subprime buddy). We had long lines for gasoline, we had our own americans being held hostage in Iran and Carter was killing us with his weakness. Reagan had the vision and balls to tell us that we could achieve things on our own without the government and he was right. He inspired me tremendously.

    My mother died in 1980 and I was eligible and received Social Security while I was in college. When Reagan came in they cut that benefit out and I stopped getting the checks. I had been relying on those social security checks too. Call it leadership or whatever you want to call it, shit, I followed the guy. When my benefits got cut off, I went out and got a part time job to make up for it.

  25. LifeOnMars says:

    “Increasing America’s debt weakens us domestically and
    internationally. Leadership means that “the buck stops here.”
    Instead, Washington is shifting the burden of bad choices today onto
    the backs of our children and grandchildren. America has a debt
    problem and a failure of leadership. Americans deserve better. I
    therefore intend to oppose the effort to increase America’s debt
    limit.”

    — Barack Obama, speech on the Senate floor, 16 Mar 2006

    http://www.votesmart.org/speech_detail.php?sc_id=64094

    BR> The issue I am raising here is not politics but hypocrisy.

    It’s the difference between offense versus defense. The lies they tell
    change depending on whether they have the ball or not.

  26. Dow says:

    I’m fascinated by the different ways that people interpret history – even while it’s being made.

  27. PDS says:

    No BR….as I attempted to say yesterday in response (for some reason the post never made it up so I will try again)…it is my position that POTUS’s “time release”, pot hole filling stimulus package of almost $1tril (passed well over a year ago) followed by various other fiscal spending goodies (nice road signs)did nothing to replace those jobs lost….and failed to meet POTUS’s target of keeping unemployment rate under 8%…instead it has risen to almost double digits and will probably surpass 10% in coming months…by administrations own admission very few jobs have been created and the future is bleak….hence the call by the Chamber of Commerce this AM for another stimulus??….but they suggest that the stimulus “saved” many jobs….I’m skeptical..I don’t know how they calculate saved jobs, they must have Madoff’s accountant and back office working on that one. After gobs (literally trillions of $’s) of fiscal stimulus and copious quantities of monetary QE and ZIRP….i ask…is this as good as it gets?…..slowing growth, double digit unemployment, consumer mailaise, even higher deficits and debts,…I’m sorry but Keynes is down for the count on this one

    BTW…ur chart showing debt as % of GDP is pretty…but it is dated….even CNBC’s S. Liesman acknowledges that its closer to 90% and headed dangerously to 100%…yikes!!

    So that is my position BR

  28. BDW says:

    Reagan used back channel communication to tell the Iranians not to release the hostages until after the elections for the sales of arms. His campaign stole Carter’s debate prep (thanks george will) and his “oh there we go again” line was actually set up knowing what Carter’s answer was going to be? The man and his cronies (most of whom we saw in dubya’s admin) should have been impeached for real crimes of high treason. Carter’s ineffectual leadership would have us at about 90% energy self-sufficient had his policies not be gutted.

    Oh sorry, back to the economic calamities caused by Randites.

    Keynes has been barely visible in any of the “stimulus” that has occurred recently. Tax cuts and printing money was not his formula. And if Keynes truly had been followed, all the stimulus would have been paid for by packing cash away during the first 5 yrs of the decade.

  29. PDS says:

    oh please BDW……the macro spirit of keynesian theory lives in more government to solve our economic problems….bottom line…please don’t parse it……and its not working…even the Fed acknowledged that today

  30. Reagan Policies Gave Green Light to Red Ink
    Washington Post
    Wednesday, June 9, 2004; Page A11

    The line is not likely to make this week’s eulogies to Ronald Reagan, but when Vice President Cheney allegedly declared, “Reagan proved deficits don’t matter,” he summed up an enduring argument from the former president’s economic legacy.

    In late 2002, Cheney had summoned the Bush administration’s economic team to his office to discuss another round of tax cuts to stimulate the economy. Then-Treasury Secretary Paul H. O’Neill pleaded that the government — already running a $158 billion deficit — was careering toward a fiscal crisis. But by O’Neill’s account of the meeting, Cheney silenced him by invoking his take on Reagan’s legacy.

    It wasn’t that Reagan’s policies proved that government borrowing had no impact on the economy. But his administration’s record — particularly with some years of hindsight — did give reason to question traditional thinking and provided a new context for future arguments about deficit spending.

    “The lesson we should have learned [from those years] is that deficits have little or no short-term economic impacts,” said William A. Niskanen, a member of Reagan’s Council of Economic Advisers.

    As important, they appeared to have no impact politically, said Stephen Moore, a conservative economist at the Club for Growth who worked in Reagan’s budget office.

    “Voters and politicians became anesthetized to big deficits,” Moore recalled. “Reagan was running these big deficits, and liberals argued it was going to be Armageddon. We were going to ruin the economy. Interest rates were going to go through the roof. And none of these things happened.”

    The fiscal shift in the Reagan years was staggering. In January 1981, when Reagan declared the federal budget to be “out of control,” the deficit had reached almost $74 billion, the federal debt $930 billion. Within two years, the deficit was $208 billion. The debt by 1988 totaled $2.6 trillion. In those eight years, the United States moved from being the world’s largest international creditor to the largest debtor nation.

  31. BDW says:

    There is nothing Keynesian about how the Fed has acted in the last 36 months…..and don’t be so naive to think laissez faire policies of the last 30 yrs is anything like Keynes. Keynes was for deficits only to create infrastructure in recessionary times, and to completely pay off those debts in good times by reducing govt and increasing taxes. He was about smoothing the curve and having honest regulations. Keynes has been completely high-jacked as a boogyman on the right or an excuse by the left.

  32. ASG says:

    Here’s a link to an article that describes in clear and simple terms just how taxes for the middle class increased under Reagan.

    http://www.nytimes.com/2004/06/08/opinion/08KRUG.html