Did Reagan Promote Class Warfare?

October 10, 2011

 

 

By: Takia Hollowell

“Aha! Gotcha, Conservatives! We have a video of your precious Reagan admitting that millionaires should not be paying lower taxes than bus drivers! He called for the rich to pay their fair share. By YOUR OWN standards, he would be classified as a class warfare-RINO socialist. You Hypocrites!”

Since historically-challenged advocates (the left) have gotten possession of Reagan’s 1985 sound bites, they have been drooling and puffing their chests out relentlessly. With a smirk on their faces, the left proudly passes around this “gotcha!” video:

Reagan Calls for No Loopholes for the Wealthy

Indeed, Reagan called for an end to loopholes. Ending loopholes is not a Republican or Democrat issue, but rather a fiscally responsible issue. There are many in both parties that are against loopholes and many in both parties that are for it. Someone may object and insist that Republicans give tax credits to oil companies. I would respond by reminding them that this is one of the reasons the Tea Party exists; to push out the old Republican establishment that engages in this type of activity. In fairness, I could dedicate a whole blog to the tax deals that Democrats give to Wall Street, Planned Parenthood, NPR, green companies (i.e. Solyndra), public sector unions, etc. Loopholes and special tax deals are bad news period.

So now that we have established that loopholes are bad, let’s dig deeper into these sound bites, shall we? Both Reagan and Obama have made speeches against millionaires not paying taxes, but what was their approach to handling this issue? Did Reagan propose raising tax rates on wealthy Americans as a fix to this problem in 1985? Not at all. This is the historical context that is missing from the latest sound bite video. In reality Reagan signed the Tax Reform Act of 1986. This piece of legislation slashed the tax rates in the top income bracket from 50% to 28%.  Additionally, the Tax Reform Act of 1986 simplified the tax code by reducing the income tax brackets from 15 levels of income to only 4. (See: TRA of 1986). Consolidation of tax brackets is essential in avoiding loopholes.

President Reagan understood that higher tax rates on the rich only causes them to hide their money away in tax shelters. Class warfare also encourages business owners to take ship and hail their businesses overseas. This is natural human behavior.  History shows that when taxes are lowered, economic growth occurs and tax revenues increase. (Take note that Bill Clinton experienced much economic growth when he lowered the Capital Gains Tax from 28% to 15% as pointed out in this video). Even Democrat John F. Kennedy proposed tax reductions to grow the economy.

Below are the tax revenue numbers behind Ronald Reagan’s presidency. According to the left Reagan should have drawn in less tax revenues with his tax cuts. Is this the case? The numbers speak for themselves.

YEAR

RECEIPTS

(in billions)

OUTLAYS
(in billions)

DEFICIT
(in billions)

1981 $599 $  678 $ 79
1982 $618 $  746 $128
1983 $601 $  808 $208
1984 $666 $  851 $185
1985 $734 $  946 $212
1986 $769 $  990 $212
1987 $854 $1,004 $149
1988 $909 $1,064 $155

*Budget of the United States Government: Historic Tables, pg 14.

As far as tax receipts/revenues, President Reagan blew his predecessor (Jimmy Carter) out the water. Unfortunately as the chart shows above, outlays/spending wasn’t curtailed under his administration. There was no revenue problem then, only a spending problem (which is true today). If tax rate reductions cause less government revenue, then why did Jimmy Carter pull in LESS tax revenue with HIGHER tax rates?

YEAR

RECEIPTS

(in billions)

OUTLAYS
(in billions)

DEFICIT
(in billions)

1978 $399.6 $458.7 $59.2
1979 $463.3 $504.0 $40.7
1980 $517.1 $590.9 $73.8
1981 $599.3 $678.2 $79.0

*Budget of the United States Government: Historic Tables, pg, 13.

The numbers clearly show that Jimmy Carter received less tax revenues than his lower-tax successor Ronald Reagan. For those of us that pay attention, we know that tax cuts don’t cause recessions. They cause economic growth because people pull their money out of tax shelters and reinvest it here in the US economy. History is on our side.

Since Reagan understood that lowering tax rates encourages business owners to release money from hiding, he called for tax cuts. Then to close the loopholes, he simplified the tax code. This is common sense. Here is a video of President Reagan after he signed the Tax Reform Act of 1986.

Tax Reform Act of 1986 Commentary by Reagan

At 7:20 in the video, Reagan quotes, “Now that we have come this far, we can not…..we will not allow tax reform to be undone with tax rate hikes. We must restore certainty to our tax code and our economy. And I’ll oppose with all my might any attempt to raise tax rates on the American people and I hope all people here will join me to make permanent the historic progress of tax reform.”

Does this sound anything like socialism or Obama?

Unfortunately many individuals have drawn conclusions from the latest sound bite video without taking the time to obtain the historical context of what Reagan was saying. I believe that President Reagan was brilliant for approaching the Democratic crowd using their own “fair share” rhetoric on them to get his bill passed. History shows after he cut taxes overall that the economy witnessed 96 months of economic growth and over 20 million new jobs (Source: Bureau of Labor Statistics). So why doesn’t Obama take his cue from the Old Gipper? Our current President is declaring war on entreprenuers despite the fact that the top 50% already pay 96.4% of the nation’s taxes (Source: www.irs.gov). What is Obama’s idea of fair? When business owners pay 100% of the nations’ taxes? I smell a socialist and it sure isn’t the Old Gipper.

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