With House Speaker John Boehner caving in on taxes, it’s worthwhile remembering the legacy of that great tax-cutter, President Ronald Reagan. Bruce Bartlett was a domestic policy adviser to Reagan and later served as a Treasury official under President George H. W. Bush. Prior to that he worked in Ron Paul’s Washington office until Paul was defeated in 1976.
Bartlett doesn’t have much nice to say about Reagan’s so-called tax cutting:
Reagan’s record on raising taxes began almost the moment he entered politics. Elected governor of California in 1966, he inherited a large budget deficit from his predecessor, Pat Brown. Although a conservative, dedicated to shrinking government, Reagan nevertheless found the magnitude of spending cuts that would have been necessary in 1967 to be beyond reach. This led him to endorse a $1 billion per year tax increase, equivalent to a $17 billion tax increase today – an enormous sum equal to a third of state revenues at that time.
The cornerstone of Governor Reagan’s economic program was not the ballyhooed budget reductions but a sweeping tax package four times larger than the previous record California tax increase obtained by Governor Brown in 1959. Reagan’s proposal had the distinction of being the largest tax hike ever proposed by any governor in the history of the United States… (emphasis added)
In the end, it is clear that Governor Reagan presided over an astonishing expansion of taxes in California. According to the California Department of Finance, state revenues tripled from $2.9 billion in the 1966/67 fiscal year to $8.6 billion in the 1974/75 fiscal year, Reagan’s last.
Bartlett reviews the Reagan history of tax cuts and tax increases and notes that, while under the influence of Jack Kemp and Arthur Laffer, Reagan was pressured to raise taxes after he cut them in 1981. Said Bartlett:
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.
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.
Bartlett added up the impact of those 11 tax increases and concluded that they gave back a lot of the tax cuts he signed into law in 1981:
According to a table in Reagan’s last budget (FY 1990), the cumulative legislated tax increase during his administration came to $132.7 billion as of 1988 ($367 billion today). This compared to a gross tax cut of $275.1 billion. Thus Reagan took back about half the 1981 tax cut with subsequent tax increases.
What, after all of this then, is Reagan’s real legacy? Notes Bartlett:
In the end, Reagan’s tax legacy fits neither the right-wing nor left-wing pigeonholes. Although he cut taxes when he could, he raised them when he had to. That’s something self-styled Reaganites today should remember.