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Distorting Reagan's Record

Did Ronald Reagan raise taxes or cut them?

Ira Stoll
July 18, 2011

Remember the big Reagan tax increase of 1982?

Well, certain elements of the press do, all of a sudden, and, lo and behold, after years of demonizing Ronald Reagan as a fiscally irresponsible tax-cutter, they are now trying to resurrect the Gipper as a tax increaser.

Here’s Albert Hunt, the executive editor for Washington at Bloomberg News, writing in his Bloomberg column: “The political hero for these conservatives is Reagan, who did slash taxes his first year as president. What the Eric Cantors of the world don’t know or ignore is that in 1982—in the midst of what was then the worst economic downturn since the Depression—Reagan approved the largest peacetime tax increase in history. On Sept. 3, 1982, the day he signed the tax hike, the jobless rate was 10.1 percent. In today’s dollars, TEFRA (The Tax Equity and Fiscal Responsibilities Act) and an accompanying small increase in gas taxes would have raised the equivalent of almost $1 trillion dollars over 10 years. The result: the economy boomed in 1983 and 1984.”

Here’s David Brooks in his New York Times column: “the people in my group (you might call us conservatives)… We look at the tax increase of 1982 and do not see a ruinous disaster.”

Vice President Biden, beware. Next thing you know, President Obama is going to try to get Reagan as his running mate for 2012. Imagine the commercials: “Ronald Reagan—vote for him and his running mate President Obama in gratitude for that 1982 tax increase, 30 years later.”)

It’s so absurd it’s almost funny. If ordinary Americans remember President Reagan as a tax-cutter rather than a tax-raiser, it’s not because they are victims of some kind of elaborate deception perpetrated by the Great Communicator. It’s because President Reagan, well, cut tax rates.

Even the left-leaning web site Slate didn’t buy the 1982-biggest-peacetime-tax-increase in history line when it was used against one of its congressional creators, Sen. Robert Dole, in the 1996 presidential campaign. Slate said, “most of Dole's tax increase was actually the partial repeal of future tax cuts that had been enacted in 1981 but had not yet taken place. Despite Dole's bill, taxpayers received more than $375 billion in tax cuts over the following three years… Almost $50 billion of Dole's 1982 projected revenue was supposed to come from cracking down on tax cheats, by adding staff to the IRS, and requiring financial institutions to withhold interest and dividends the way employers withhold wages. (This provision was repealed the next year, before it could take effect.) Is getting people to pay taxes they already owe but would otherwise escape a ‘tax increase’?”

As for President Reagan himself, on the weekend he was supposedly signing the biggest peacetime tax increase in American history, his only public comment on the tax question came in a radio address from Rancho del Cielo. And that speech wasn’t exactly one in which he patted himself on the back for doing the supposedly fiscally responsible thing, bucking his party’s base, and raising taxes. “I’m convinced that in these last few decades the increased intervention by government in the marketplace, tax policies that took too great a percentage of overall earnings, plus burdensome and unnecessary regulations reduced economic growth and kept us from creating new jobs for newcomers entering the job market,” the president said.

“Our economic recovery program” Reagan said, “marks a decided turnaround from government tax-and-spend policies of the past four decades—deliberately so.”

If there’s a message from 1982 that’s relevant to our present situation, that’s the one.

Ira Stoll is editor of FutureOfCapitalism.com and author of Samuel Adams: A Life. This column first appeared at Reason.com.



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