The Reagan Tax Cuts: Lessons for Tax Reform
The Reagan tax cuts, like similar measures enacted in the 1920s and 1960s, showed that reducing excessive tax rates stimulates growth, reduces tax avoidance, and can increase the amount and share of tax payments generated by the rich. High top tax rates can induce counterproductive behavior and suppress revenues, factors that are usually missed or understated in government static revenue analysis. Furthermore, the key assumption of static revenue analysis that economic growth is not affected by tax changes is disproved by the experience of previous tax reduction programs. There is little reason to expect static revenue analysis to evaluate the economic or distributional effects of current tax reform proposals much better than it evaluated the Reagan tax program 15 years ago.
Taxes: What people forget about Reagan - Sep. 8, 2010
Soon after taking office in 1981, Reagan signed into law one of the largest tax cuts in the postwar period.
That legislation -- phased in over three years -- pushed through a 23% across-the-board cut of individual income tax rates. It also called for tax brackets, the standard deduction and personal exemptions to be adjusted for inflation starting in 1984. That would reduce "bracket creep" since the high inflation of the 1970s and early 1980s meant incomes rose very fast, pushing taxpayers into ever higher brackets even though the real value of their income hadn't changed.In 1986, Reagan lowered individual income tax rates again, this time in landmark tax reform legislation.
As a result of the 1981 and 1986 bills, the top income tax rate was slashed from 70% to 28%."Reagan 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," said tax historian Joseph Thorndike.
Two bills passed in 1982 and 1984 together "constituted the biggest tax increase ever enacted during peacetime," Thorndike said.
The bills didn't raise more revenue by hiking individual income tax rates though. Instead they did it largely through making it tougher to evade taxes, and through "base broadening" -- that is, reducing various federal tax breaks and closing tax loopholes.Sounds to me like liberals today should be worshiping Reagan.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't designed to increase federal tax revenue. But that didn't mean that no one's 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.
So much for doubling taxes on the middle class.All told, the tax increases Reagan approved ended up canceling out much of the reduction in tax revenue that resulted from his 1981 legislation.
Women (Nasty or otherwise) are going to be the reason that Donald Trump is NEVER President!