Taxes: What People Forget About Reagan

[tcjams]

Now, before you guys get started...I did not post this article to go SEEEEEEE, HAHAHAHA, I'm not that kind of person despite the differences I've had with my fellow Dinarians. I posted this article because it's relevant with regards to where we are economically today and what needs to be done. At some point we really need to realize that finger pointing on both sides of the isle can be done till we're red, white, and blue in the face. It still won't get anything done.

How can it even be comprehended that one man can single handedly bring down AMERICA?!?!? How can it be insinuated that it's some plan of this "closet muslim" to destroy America? Come the hell on!!! No one party or person can destroy America. The one thing that could destroy America is our own divisivness. Not one person in this forum can tell me, had they been elected 18 months ago with the state our economy was in then, how they could effectively fix it quickly. IT'S GONNA TAKE TIME PEOPLE.

So, please read this post with the intelligence and the reality it's conveying. It's gonna take all of us to fix this. United We Stand, Divided We Fall...

If you still find the need to bash. Bash away.........

NOW THE ARTICLE

Those who oppose higher taxes and are fed up with record levels of U.S. debt may pine for Ronald Reagan, the patron saint of lower taxes and smaller government.

But it's worth considering just what Reagan did -- and didn't do -- as lawmakers grapple with many of the same issues that their 1980s counterparts faced: a deep recession, high deficits and a rip-roaring political divide over taxes.

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.

The 1981 bill also made certain business deductions more generous.

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%.

Despite the aggressive tax cutting, Reagan couldn't ignore the budget deficit, which was burgeoning.

After Reagan's first year in office, the annual deficit was 2.6% of gross domestic product. But it hit a high of 6% in 1983, stayed in the 5% range for the next three years, and fell to 3.1% by 1988. (By comparison, this year it's projected to be 9% but is expected to drop considerably thereafter.)

So, despite his public opposition to higher taxes, Reagan ended up signing off on several measures intended to raise more revenue.

"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.

For instance, more asset sales became taxable and tax-advantaged contributions and benefits under pension plans were further limited.

"What people forget about Ronald Reagan was that he very much converted to base broadening as a means of reducing deficits and as a means of tax reform," said Eugene Steuerle, an Institute Fellow at the Urban Institute who had helped lay the groundwork for tax reform in 1986 and served as a deputy assistant Treasury secretary during Reagan's second term.

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.

"Some of these taxpayers were substantial contributors to the Republican Party and to the president's re-election campaign, and had direct access to the White House. Reagan rebuffed their pleas," wrote J. Roger Mentz, the Treasury assistant secretary for tax policy in 1986, in a Tax Notes commentary last year.

All told, the tax increases Reagan approved ended up canceling out much of the reduction in tax revenue that resulted from his 1981 legislation.

Annual federal tax receipts during his presidency averaged 18.2% of GDP, a smidge below the average under President Carter -- and a smidge above the 40-year average today.

How might Reagan fare today?

Reagan's behavior might not pass muster with those voters today who insist their Congressmen treat every proposed tax increase as poisonous to the republic.

"By today's standards, the Gipper would easily qualify for status as a back-stabbing, treacherous RINO [Republican in Name Only]," wrote Tax Analysts contributing editor Martin Sullivan, in an article for Tax Notes in May.

Thanks in part to the increases in defense spending during his administration, Reagan also didn't really reduce the size of government. Annual spending averaged 22.4% of GDP on his watch, which is above today's 40-year average of 20.7%, and above the 20.8% average under Carter.

Indeed, in one very symbolic respect he enlarged it. While in the early years of his presidency Reagan tried to shrink the IRS, by the end, the number of IRS employees hit an all-time high, according to Steuerle in his book Contemporary U.S. Tax Policy.

The reason was two-fold, Steuerle said. The first was a desire to crack down on the proliferation of tax shelters. But the point of cracking down was to boost tax revenue. That, in turn, could reduce the need to impose other tax increases to combat budget deficits.

LINK

[Kr3W]

It's not the governments job to fix a FREE ECONOMY. And it's definitely not their job to put our country into trillions of dollars in debt.

[DesertPete]

This is all VERY VERY simple.

The laws of economics are like the laws of gravity. If you violate them or disregard them in ANY way you will suffer the consequences. They may not be as immediate but they are as certain.

Runaway government spending due to government entitlements that have been granted by corrupt and lying politicians, some more so than others, regardless of party affiliation to buy votes in order to stay in power and foster their own selfish interests and support themselves on the backs of the tax payers, both individuals and businesses. These politicians simply "vote" and create corrupt laws that allow them to literally steal the wealth of this country and line their own pockets to gain more power under the pretense of protecting you the "little guy". They do this through the the media which they control by demonizing any individual, group, business, or organization that truly works hard and stands for the rights to liberty, freedom, and the pursuit of happiness. They are able to do this without impunity because the bulk of the people are foolish enough to believe that this is being done in their best interests.

This country was founded by GOD (Jesus Christ) on the principles of truth, freedom and salvation both temporal and spiritual for the individual. ANY policy or law that lessens the freedom of the individual in favor of the government determining what is best for us violates the laws of GOD puts the control of our lives in the hands of an elite few that believe that they are somehow smarter that you and I. AND, if you disagree with them they will make you pay. You will be demonized just like anyone else who disagrees with them.

Do your best to know the heart of the INDIVIDUAL (not the party) that you will vote for, pray for guidance to make that decision based on you own spiritual DNA as a son or daughter of a divine being that has endowed you with the power to exercise your free agency, than have the courage to do so. You will then have earned the right to be called an AMERICAN!

[The Watcher]

One man cannot destroy a country? Perhaps not, but Hitler mesmerized the German people with his smooth talk and in effect did destroy Gemany with the help of an apathic populace.

Reagan had to tackle 13% inflation and 21% interest rates. He did it by putting money into the pockets of people. By the way, Reagan had to deal with Tip O'Neal and a Democrat Congress but he got it done.

Reagan also had to contend with an agressive Soviet Union. Reagan spent them into dust, and therefore set millions free.

I will take Reagan any day of the week compared to the community organizer. By the way, by the time Bill Clinton got into office the economy was white hot, thanks to Reagan and Bush 41. Clinton got the credit for a balanced budget. He owes that to a Republican congress, who controls the purse strings. An analogy, Eisenhower lead the troops in WWII, but the grunt on the ground did the heavy lifting.

[dlbfilm]

Wow.... what else can you say????

[kjwayne]

I want to add one thing to this; GET OUT AND VOTE, do not set on your butt ,just to complain later about who WON! Do it for YOUR COUNTRY! WE NEED YOU!

PS, i,m voting all incumbants ,OUT! Damn the spelling. ENUFF SAID!!!

[MrRich]

Thanks for the post tcjams. I agree that no one individual can destroy this country and no one individual can save it. As you may have seen I am not on the "bash Obama" bandwagon. I want to address a few points, however.

Those of us who are old enough to have voted for Reagan twice remember the points he made. Supply side economics says that you can actually increase revenues to the federal government by lowering the tax rates because that leaves more money in the hands of people to spend, invest, and stimulate the economy thus putting more people to work and paying taxes into the system. So while in fact taxes went up under Reagan (revenues) the tax rates went down. The same thing happened when JFK cut taxes in the 60s and when Bush cut taxes in the 2000s.

Also, one of the reasons that the economic boom began under Reagan was because of the reduction in the intrusive nature of the federal govt and red tape. Reagan said repeatedly that he wanted to get the govt off the backs of the American people and turn them loose to do what they are best at ... innovating and producing. And that's what happened. Venture capital made available during the Reagan administration is what eventually led to the tech and internet boom of the 90s. Microsoft, Oracle, Dell, Cisco ... they didn't get their start in the 90s. That's just when they experienced exponential growth. A quick glance at the DOW, AMEX, and NASDAQ charts over the past few decades will show you the results of Reaganomics.

And finally, you can only make the point that the federal government grew in size under Reagan if you include the military. Yes, Reagan increased military spending and personnel. In my opinion that was needed. But come on, when people talk about reducing the size of the federal government they're not talking about the military. They're talking about the bureaucracy. And the bureaucracy did in fact tighten up somewhat under Reagan.

Reagan wasn't perfect by any means. I could go over a number of things that I wish he had done differently but overall his economic policies were good for the country. I'm afraid that when we look back at the Obama administration we won't be able to say the same thing.

[PNixon]

One man brought down Europe!

[tcjams]

I can appreciate eveyones view on my post. I only have a couple of comments.

DesertPete: With regards to your comment "This country was founded by GOD (Jesus Christ) on the principles of truth, freedom and salvation both temporal and spiritual for the individual. "

My Bible says that God created the heavens and EARTH!!! This universe belongs to GOD. We are all Gods people. I can really, honestly appreciate your disgust with the government, I don't have to agree with it but I can appreciate it's your point of view. But based on your comment I think you need to keep in mind that God is inclusive, not exclusive. There's not a heaven for Americans and another one for everyone else. You need prayer...

Scooby Doo: Very eloquently put and well thought out my friend. Again, you're actually proving my point. President Reagan made tough decisions that weren't appreciated when he made them but the long term effects were seen as his policies were put into play but, again, were not popular when presented.

Kjwayne: I've been saying that for 28yrs!! Also, your voting decision is pretty much par for the course throughout history anyway.

TheWatcher: What????? This is not Germany and President Obama is not HITLER!! C'mon dude, you can do better than that!!! You obviously know how to research but the comparison????..please. Anyway, again you too, are proving my point. Something had to be done and it took time for the policies to take effect, and it took longer that two years, and as you allude to Reagan and Clinton...how many years were between them???? Exactly.....Thanks again for your comment.

Kr3W: Huh???????

dlbfilm: What are YOU saying......

PNixon: It's 2010 and THIS IS NOT EUROPE!!!!!!

Done.

[MrRich]

Thanks for the response, tcjams. You're right. Reagan's first two years were no picnic. And like Obama Reagan inherited a bad economy that took time to turn around. I have told people repeatedly that Obama can still turn things around like Reagan did, but he has to have the right economic plan. I like the guy actually, as far as democrats go. He's more likable than Bush and more decent than Clinton. I just don't agree with his policies and think they are likely to make things worse instead of better, but as Enorrste says I could be wrong. If the economy improves as it did in the first terms of Reagan, Clinton, and Bush then I'm sure he'll be reelected. But it better start soon. An RV of the dinar could be the answer.

[tcjams]

Thanks for the response, tcjams. You're right. Reagan's first two years were no picnic. And like Obama Reagan inherited a bad economy that took time to turn around. I have told people repeatedly that Obama can still turn things around like Reagan did, but he has to have the right economic plan. I like the guy actually, as far as democrats go. He's more likable than Bush and more decent than Clinton. I just don't agree with his policies and think they are likely to make things worse instead of better, but as Enorrste says I could be wrong. If the economy improves as it did in the first terms of Reagan, Clinton, and Bush then I'm sure he'll be reelected. But it better start soon. An RV of the dinar could be the answer.

AGREED!!!!

[stargazer55]

SNIP

And like Obama Reagan inherited a bad economy ...

Your right. Obama inherited a bad economy. Also, don't forget that he brought it on himself (and us) by voting for it and being a big part of the cause by threatening banks to give mortgages to people who couldn't pay them.

[PNixon]

1940s . . . 2010 . . . just different years in the existence of man. No difference.

[kingfish]

PNixon: It's 2010 and THIS IS NOT EUROPE!!!!!!

Read more:

TRUE!!!! IT IS 2010 AND IF WE DONT FIX THIS "OBAMANATION" IN NOVEMBER.... WE WILL BE IN WORSE SHAPE THAN EUROPE IN 2012!!!