Ten years ago today, the wealthiest Americans caught a multi-billion dollar break from their benefactor, then-president George W. Bush. In the decade since, through two wars, natural disasters, a plummeting economy and a soaring debt, the wealthiest Americans have gotten to keep those Bush tax cuts. Happy birthday, everybody!
As the Republican Party now lines itself up behind Rep. Paul Ryan on his mission to cut the resulting deficit on the backs of working people and the elderly, I find myself surprisingly and strangely nostalgic for another GOP hero, whose legacy, at least when it comes to taxes, has become woefully misunderstood. Can it be that I find myself nostalgic for Ronald Reagan?!
Of course, I'm not alone in my nostalgia. I'm joined by the entire Republican leadership in this, but I think our reasons may be quite a bit different. In the spirit of unity, I'd like to suggest to Republicans in Congress that they look closely at the record of their favorite 20th century hero and adopt yet another policy named after the Gipper. I'm no fan of much of President Reagan's legacy, but in a new spirit of bipartisanship, and historical accuracy, I'd like to present Republicans in Congress with an idea: the Ronald Reagan Tax Reform Act of 2011.
A key element of the Reagan lore believed by today's GOP is that Reagan's embrace of "trickle-down economics" is what caused any and all economic growth since the 1980s. In fact, after Reagan implemented his initial tax-slashing plan in 1981, the federal budget deficit started to rapidly balloon. Reagan and his economic advisers were forced to scramble and raised corporate taxes to calm the deficit expansion and stop the economy from spiraling downward. Between 1982 and 1984, Reagan implemented four tax hikes. In 1986, his Tax Reform Act imposed the largest corporate tax increase in U.S. history. The GDP growth and higher tax revenues enjoyed in the later years of the Reagan presidency were in part because of his willingness to compromise on his early supply-side idolatry.
The corporate tax increases that Reagan implemented -- under the more palatable guise of "tax reform" -- bear another lesson for Republicans. The vast majority of the current Republican Congress has signed on to a pledge peddled by anti-tax purist Grover Norquist, which beholds them to not raise any income taxes by any amount under any circumstances, or to bring in new revenue by closing loopholes. This pledge, which Rep. Ryan's budget loyally adheres to, in effect freezes tax policy in time -- preserving not only Bush's massive and supposedly temporary tax cuts for the wealthiest Americans, but also a vast mishmash of tax breaks and loopholes for specific industries won by well-funded lobbyists.
The problem has become so great that many giant American corporations have become so adept at exploiting loopholes in the tax code that they paid no federal income taxes at all last year -- if Republicans in Congress follow their pledge to Norquist, they won't be able to close a single one of the loopholes that are allowing corporations to avoid paying their fair share.
Even Reagan recognized the difference between just plain raising taxes and simplifying the tax code to cut out loopholes that subsidize corporations. In 1984, he arranged to bring in $50 billion over three years, mainly by closing these loopholes. His 1986 reform act not only included $120 billion in tax hikes for corporations over five years, it also closed $300 billion worth of corporate loopholes.
These kinds of tax simplification solutions are available for Congress if they want them. As I wrote in April, nixing Bush's tax cut's for the wealthiest Americans would help the country cut roughly $65 billion off the deficit in this year alone. Closing loopholes that allow corporations to shelter their income in foreign banks would bring in $6.9 billion. Eliminating the massive tax breaks now enjoyed by oil and gas companies would yield $2.6 billion to help pay the nation's bills.
But before Republicans in Congress change their math, they have to change their rhetoric -- and embrace the reality of the economic situation they face and the one that they'd like to think they're copying. In 1986, during the signing ceremony for the Tax Reform Act, Reagan explained that "vanishing loopholes and a minimum tax will mean that everybody and every corporation pay their fair share."
It's time for the GOP to take a page from their hero's playbook. If they do so, they might be able to find some allies that they never thought possible. It's time for "everybody and every corporation to pay their fair share." We can all get along. Sign me up for "The Reagan Tax Reform Act of 2011."
Follow Michael B. Keegan on Twitter: www.twitter.com/peoplefor
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Sen. Fritz Hollings: What's Wrong With Washington?
Sen. Tom Carper: The U.S. Must Learn How to Spend Smarter
Reagan very cleverly covered his incompetence as an administrator: he borrowed from Social Security the funds he had put there by increasing the employee and employer contribution to more than 15%. Every dollar working people--yes, union members--paid to SS, fifteen cents went to into the fund and was instantly borrowed by Reagan to give tax breaks to the wealthy and INCREASE MILITARY SPENDING FROM CARTER'S 125 BILLION A YEAR TO REAGAN'S 305 BILLION A YEAR WITH NO WAR OR THREAT OF WAR, JUST THROWING MONEY AT THE MILITARY-INDUSTRIAL COMPLEX.
Thank you Ronald Reagan for bankrupting America! However, Reagan deserves credit for arming Saddam Hussein (selling him helicopters and chemicals for nerve gas) and creating wealthy war contractors.
It would seem that low and moderate income taxpayers are the ones that should retain more of their earnings to spend into the economy, not less.
Budget for the American People.
http://cpc.grijalva.house.gov/index.cfm?sectionid=70
George Bush Sr. called Reaganomics 'voodoo economics'.
'Trickle-down' economics has proven to not work.
Yet, we continue to beat the same old dead horse...
A tax cut? Is that what you're talking about?
I thought you might have cited the tax increases Reagan produced a number of times.
You do realize, don't you, that tax rates in this country right now are the lowest since like 1950? Where are the jobs? All the wealth is flowing to the top 1% - so where are the jobs they are supposed to create under your 'trickle down' theory?
It doesn't work, plain and simple. Study the facts, not the fantasy....
Do away with the IRS, pay at the bank.
Problem solved
Feed the wealthy and starve the rest.
You are right, Reagan did raise taxes, only after cutting them. However, during the cuts and raises, normalized tax revenue as a percentage of GDP stayed fairly constant, about 18%, meaning that the deficits created under Reagan and continued into today is not something caused by the tax cuts and it is not something that can be solved with tax increases. Our deficits exist because of spending: some of it on wasteful wars and other ridiculous discretionary spending, but most of it due to runaway entitlement spending that is a ruinous autopilot trajectory. Tax increases are not the answer, entitlement reform is.
You do make a good point that 51% of Americans paid no federal income tax last year, indicating that they are not paying their fair share for government services. We need to broaden the tax base and start making these freeloaders pay. It is time that they stop leeching off the middle class and the wealthy.
Finally, I am not sure why you are so down on Bush and his tax cuts. Clinton reduced capital gains taxes by 40%, which is the main method that the wealthy get their income, whereas Bush decreased CGT by 25%. Not to mention that Clinton, repealed Class-Steagall, reduced welfare, and signed NAFTA. Maybe the instead of taking a page out of the Grippers book, the GOP should take a page out of Clinton’s book. The economy was so good then, no?
Kai
I totally am with you on a cut in military spending, especially the wars, but they are not the cause of our budget problems and they are not long-term budget problems. By all means let’s cut defense spending. Sign me up. But at the same time lets deal with the real problem, entitlements:
http://www.economist.com/blogs/dailychart/2011/03/americas_budget
http://www.usgovernmentspending.com/fed_entitlement_spending_chart_09_014.html
http://www.discoverynews.org/2011/02/x044111.php
Kai
http://www.economist.com/blogs/dailychart/2011/03/americas_budget
Kai
http://thinkprogress.org/politics/2011/02/05/142288/reagan-centennial/
Yes, government can use the tax code to create incentives for certain valued economic activity, like energy research. But most loopholes currently in the code are errors, or have lost their original purpose. The Republicans and Democrats should agree to close the loopholes as one united public action.
Keep in mind how all economic wealth is generated, by the labor of citizens, and their spending for their needs. High unemployment means losing the productive labor of millions of people, and their spending to provide for their food, housing, transportation, etc. Any economic plan needs to keep this fundamental in mind and fuel the engine that drives our economy, the labor and consumption of citizens.
http://www.economist.com/blogs/buttonwood/2010/02/deficits_crucial_argument
I thought the government cant create jobs... just cut taxes and regulations(and then have bubbles bust,stock markets crash and bailouts).
And he increased Soc Sec taxes and medicare taxes... also... then the surpluses they generated were used to offset his deficts tyhat wnet through the roof and now repugs towant to pay back those surpluses thye used up under regana and Bush with tax cust that failed.
And I did vote for him.... At least when his idealogy failed, he moved on to correcting problems, instead of proposing doing more of the same that had failed.
Regards
If we would let the tax cuts for the wealthy expire, and get rid of two wars that are not funded the majority of the current deficit would disappear virtually overnight.
I do agree on one thing however--I believe that even if it is largely symbolic every single American should pay some kind of federal tax. All American's need to feel they are participating in supporting their country.
Of course in states like mine (Texas) the taxes from the state level are incredibly regressive (49th of 50th most regressive). People earning $11,000 and under pay nearly 13% of their income in state taxes. People earning in the top 20% pay on average 3%. This is what happens when most taxes are raised by sales tax and there is no state income tax.
When saying that 50% of he country pays no taxes you are not taking into account local and state taxes. The total tax burden in this country has become incredibly regressive. The 15% tax rate on capital gains is one of the reasons so many rich people pay so much less in taxes than middle class and poor (less % that is).