The Liberal View of Ronald Reagan: Taxes

By Douglas V. Gibbs

Ronald Reagan was one of the greatest Presidents of the United States. Not the greatest, but one of the greatest. George Washington, James Madison, and Calvin Coolidge rank higher, in my opinion, but Reagan does well if those are his competitors for the title.

Reagan proved that conservatism wins elections, conservatism creates prosperity, and peace through strength is a truth that not only keeps the peace, but brings down tyranny and the walls that imprison a people.

The legacy of Ronald Reagan lives on in the hearts and minds of conservatives worldwide.

As expected, the liberal left is working to revise history, and change who Reagan was. They are like sheep all bleating the same nonsense, but since the liberal left has control over the media and education system, their myths about Reagan have a potential to take hold.

Problem is, like most of what comes out of the mouths of the liberal left, they are nothing more than politically charged lies.

One of the most recent ones is how Ronald Reagan increased taxes, not lowered them, and that in fact the largest tax increase in history came by the hand of Reagan.

As Governor of California Reagan also raised taxes, though this came shortly after his years as a liberal, and believe it or not, early in his life he was a staunch supporter of Franklin Delano Roosevelt - a president no conservative can even consider harboring a good thought about.

But wasn't Reagan a big tax cutter?

Yes.

Confused yet?

Right off the bat, once Reagan took office, he enacted a 25 percent across-the-board tax cut (The Economic Recovery Tax Act of 1981). After Reagan's economic policies took effect family incomes rose by 11 percent. This followed a 9% drop during the Carter years, which were the result of liberal policies.

Reagan entered the White House with a U.S. economy that was in very bad shape. He needed to move quickly, and he did. Runaway inflation, an auto industry in peril, and the American way of life in jeopardy, led Reagan to attack the top tax rate, which was at 70%. He cut the rate in half to 35%, while also eliminating many tax shelters that the rich routinely relied on to avoid paying taxes altogether, forcing them to invest in the free market and actually pay taxes. Immediately, the economy began to respond, taking off for an unprecedented period of peacetime growth. Inflation slowed down, unemployment rates fell, interest rates dropped, and the following decade of prosperity was the result.

Ronald Reagan also made a serious mistake in 1982. He trusted the Democrats to stick to their word, and the deal seemed too good to pass up, even though conservatives of the day were not supportive of it. I am referring to the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). The deal was that Congress, which was dominated by Democrats at that time, would approve three dollars in spending cuts for every dollar of tax increase. Reagan considered TEFRA to be a pretty good "70 percent" deal, if the Democrats kept to their end of the bargain.

Surprise! The Democrats lied. Congress wound up cutting less than twenty-seven cents for every new tax dollar. What had seemed to be an acceptable 70-30 compromise turned out to be a 30-70 sword in the side. Although the deal left the individual tax rate reductions approved the previous year untouched, with a series of tax deferments and rule changes through a series of business and excise taxes plus the removal of business tax deductions, it wound up becoming the largest peacetime tax increase in U.S. history.

Only the fact that his individual tax rate reductions were larger saved the Reagan era of prosperity from becoming a disaster.

The problem was that Reagan believed that members of Congress wouldn't lie to him. He should have known better. That is what liberals do: they lie. As a result of TEFRA, Reagan learned to "trust but verify," whether he was dealing with a Speaker of the House or the communist leader of the Soviet Union.

The prosperity from Reagan's tax cuts reached all the way into Bush 43's presidency. Had the spending cuts also ensued as hoped for, the prosperity would have lasted longer. Unfortunately, Reagan had a Democrat-led Congress to deal with, and spending cuts were not on the table.

We have an opportunity again to turn our country around and create another era of prosperity. Spending cuts, entitlement reform, and a reduction in taxes will lead us once again in a direction of prosperity. But, like always, the Democrats are working on their own plans to deceive, and destroy.

The Republicans only have to stand their ground. To cave would result in a devastating loss for the GOP, as happened after Bush 41's betrayal when he reneged on his "No New Taxes" pledge.

-- Political Pistachio Conservative News and Commentary

Cato Institute Policy Analysis No. 261: Supply-Side Tax Cuts and the Truth about the Reagan Economic Record