In an active thread that debunks the liberal falsehoods about the Trump tax cuts ("Understanding the Liberal Propaganda About the Trump Tax Cuts"), one of our resident liberals (edthecynic) once again posted the same misleading arguments about the Reagan tax cuts that he and other liberals have posted on several previous occasions. I have personally answered these arguments at least three times in the last three years, and after the last time I even wrote an article that refuted them. Yet, incredibly, he trotted them out again yesterday.
Let's take a look at these misleading arguments and answer them yet again:
Well, actually, Reagan's tax cuts came in two bills, one passed in 1981 and the other passed in 1986. The 1981 tax cuts did not take effect until August 1981--more importantly, those tax cuts were not implemented all at once but took effect in phases over a three-year period. This is a key point that this guy and other liberals simply ignore. If you look at the tax tables for 1980 and 1986, not to mention 1988, you can see how massively Reagan cut taxes after all was said and done.
Uh, yeah, because a huge recession started in July 1981, which obviously had nothing to do with Reagan's tax cuts, and that recession ended in November 1982. That is why revenue dropped. Reagan's 1981 tax cuts did not take effect until August 1981 and were not even fully implemented until after the recession ended.
It is hard to imagine how to pack so much distortion and falsehood into barely three lines of text. In response, allow me to first quote from my article on the Bush and Reagan tax cuts:
To put the nail in the coffin of the distortions and falsehoods about Reagan's tax policies, let's compare the tax rates in 1980 under Jimmy Carter with the tax rates in 1986, after Reagan's 1981 tax cuts had been phased in, and with the tax rates in 1988, Reagan's last year in office and after all of his tax cuts were in effect:
1980 (under Jimmy Carter)
Tax Bracket Tax Rate
$0.00+ 0%
$3,400.00+ 14%
$5,500.00+ 16%
$7,600.00+ 18%
$11,900.00+ 21%
$16,000.00+ 24%
$20,200.00+ 28%
$24,600.00+ 32%
$29,900.00+ 37%
$35,200.00+ 43%
$45,800.00+ 49%
$60,000.00+ 54%
$85,600.00+ 59%
$109,400.00+ 64%
$162,400.00+ 68%
$215,400.00+ 70%
1986
Tax Bracket Tax Rate
$0.00+ 11%
$3,000.00+ 15%
$28,000.00+ 28%
$45,000.00+ 35%
$90,000.00+ 38.5%
1988
Tax Bracket Tax Rate
$0.00+ 15%
$30,950.00+ 28%
It should noted that Reagan also cut the corporate income tax rate by a whopping 25% (by 12 percentage points), from 46% to 34%--he cut it to 40% in 1987 and then to 34% in 1988. (And, to his credit, when Clinton came into office, he only raised the corporate income tax by 1 percentage point, to 35%, where it stayed until Trump cut it to 21% last year. The average corporate income tax rate in Europe and Asia is between 18% and 21%.)
Now let's see what happened to federal revenue after these massive tax cuts. Let's see what happened to federal revenue from 1983, after the recession ended, through 1989, keeping in mind that Reagan's 1981 tax cuts were phased in over a three-year period and that Reagan's second tax-cut bill, which cut taxes massively for all personal income over $45K, passed in 1986:
1983 -- $326 billion
1984 -- $355 billion
1985 -- $396 billion
1986 -- $412 billion
1987 -- $476 billion
1988 -- $496 billion
1989 -- $549 billion
To put these revenue hikes in percentages, federal revenue rose by a staggering 68% from 1983 to 1989. To put that in personal terms, imagine if you started a job in 2012 and your salary had risen by 68% as of this year--that would mean that your annual raises averaged over 11%!
Seriously, will liberals ever stop lying about the Reagan tax cuts? If they can't bring themselves to acknowledge the facts about the Reagan tax cuts, what hops is there that they will be truthful about the Trump tax cuts?
Setting the Record Straight About the Bush and Reagan Tax Cuts
Reagan tax cuts provide a valuable lesson
The Facts About Tax Cuts, Revenue, and Growth
Supply-Side Tax Cuts and the Truth about the Reagan Economic Record
Reaganomics, by William A. Niskanen: The Concise Encyclopedia of Economics | Library of Economics and Liberty
Let's take a look at these misleading arguments and answer them yet again:
Well, actually, Reagan's tax cuts came in two bills, one passed in 1981 and the other passed in 1986. The 1981 tax cuts did not take effect until August 1981--more importantly, those tax cuts were not implemented all at once but took effect in phases over a three-year period. This is a key point that this guy and other liberals simply ignore. If you look at the tax tables for 1980 and 1986, not to mention 1988, you can see how massively Reagan cut taxes after all was said and done.
Uh, yeah, because a huge recession started in July 1981, which obviously had nothing to do with Reagan's tax cuts, and that recession ended in November 1982. That is why revenue dropped. Reagan's 1981 tax cuts did not take effect until August 1981 and were not even fully implemented until after the recession ended.
It is hard to imagine how to pack so much distortion and falsehood into barely three lines of text. In response, allow me to first quote from my article on the Bush and Reagan tax cuts:
To this day, in spite of the clear economic record, liberals continue to lie about and distort Reagan’s record on tax cuts and tax increases. They endlessly point out that Reagan raised taxes in 1982 and 1984, but they ignore the fact that his tax hikes were far smaller than his tax cuts and that he agreed to those tax hikes because Congress promised to enact spending reductions. Congress broke its word and never did cut spending. Liberals also often ignore the fact that Reagan’s tax hikes involved business income and loopholes, not personal income tax rates, and that he cut personal income taxes again in 1986.
One of the “tax increases” that liberals include in their list of Reagan tax hikes is his increase in the payroll tax (i.e., the Social Security tax). Reagan agreed to this increase as part of a deal with Democrats to ensure that Social Security stayed solvent. It seems rather misleading and unfair to label as a “tax increase” an increase in the amount that citizens must contribute to a fund from which they will later draw. Although raising the payroll tax does mean less money in peoples’ pockets, it also means that they will be able to collect their full promised Social Security benefit when they reach retirement age.
Liberals usually ignore the fact that Reagan’s historic 1981 tax cuts were phased in over a three-year period. The 1982 and 1984 tax-hike bills that Reagan signed did not raise revenue by raising personal income tax rates; rather, they raised revenue by making it harder to evade taxes, by reducing various tax breaks for businesses, and by closing tax loopholes. Reagan’s 1986 tax reform measure cut the top marginal rate down to 28%, but it also reduced tax breaks and tax shelters for the rich.
Again, the bottom line is that under Reagan the overall tax burden on Americans dropped dramatically. Anyone can look at the tax brackets for 1980 and 1988 and see that income tax rates were much lower at the end of Reagan’s presidency than they were when he took office. The next time a liberal tries to tell you that Reagan’s tax hikes “cancelled out much of his tax cuts,” just show them those tax tables.
Reagan also cut the capital gains tax rate for individuals. In 1979, the capital gains tax rate for individuals was 35%. In 1981, Reagan reduced that rate to 20%, and it stayed at that level for five years. In 1986, he agreed to raise the rate to 28%, but that was still far lower than what it had been before he took office. In other words, when Reagan left office in January 1989, the capital gains tax rate for individuals was 20% lower, or 7 percentage points lower, than it had been the year before he was elected.
Incidentally, as a result of the Reagan tax cuts, tax payments and the share of income taxes paid by the top 1% climbed sharply. For example, in 1981 the top 1% paid 17.6% of all personal income taxes, but by 1988 their share had jumped to 27.5%, a 10 percentage point increase. The share of the income tax burden borne by the top 10% of taxpayers increased from 48.0% in 1981 to 57.2% in 1988. Meanwhile, the share of income taxes paid by the bottom 50% of taxpayers dropped from 7.5% in 1981 to 5.7% in 1988.
One of the “tax increases” that liberals include in their list of Reagan tax hikes is his increase in the payroll tax (i.e., the Social Security tax). Reagan agreed to this increase as part of a deal with Democrats to ensure that Social Security stayed solvent. It seems rather misleading and unfair to label as a “tax increase” an increase in the amount that citizens must contribute to a fund from which they will later draw. Although raising the payroll tax does mean less money in peoples’ pockets, it also means that they will be able to collect their full promised Social Security benefit when they reach retirement age.
Liberals usually ignore the fact that Reagan’s historic 1981 tax cuts were phased in over a three-year period. The 1982 and 1984 tax-hike bills that Reagan signed did not raise revenue by raising personal income tax rates; rather, they raised revenue by making it harder to evade taxes, by reducing various tax breaks for businesses, and by closing tax loopholes. Reagan’s 1986 tax reform measure cut the top marginal rate down to 28%, but it also reduced tax breaks and tax shelters for the rich.
Again, the bottom line is that under Reagan the overall tax burden on Americans dropped dramatically. Anyone can look at the tax brackets for 1980 and 1988 and see that income tax rates were much lower at the end of Reagan’s presidency than they were when he took office. The next time a liberal tries to tell you that Reagan’s tax hikes “cancelled out much of his tax cuts,” just show them those tax tables.
Reagan also cut the capital gains tax rate for individuals. In 1979, the capital gains tax rate for individuals was 35%. In 1981, Reagan reduced that rate to 20%, and it stayed at that level for five years. In 1986, he agreed to raise the rate to 28%, but that was still far lower than what it had been before he took office. In other words, when Reagan left office in January 1989, the capital gains tax rate for individuals was 20% lower, or 7 percentage points lower, than it had been the year before he was elected.
Incidentally, as a result of the Reagan tax cuts, tax payments and the share of income taxes paid by the top 1% climbed sharply. For example, in 1981 the top 1% paid 17.6% of all personal income taxes, but by 1988 their share had jumped to 27.5%, a 10 percentage point increase. The share of the income tax burden borne by the top 10% of taxpayers increased from 48.0% in 1981 to 57.2% in 1988. Meanwhile, the share of income taxes paid by the bottom 50% of taxpayers dropped from 7.5% in 1981 to 5.7% in 1988.
To put the nail in the coffin of the distortions and falsehoods about Reagan's tax policies, let's compare the tax rates in 1980 under Jimmy Carter with the tax rates in 1986, after Reagan's 1981 tax cuts had been phased in, and with the tax rates in 1988, Reagan's last year in office and after all of his tax cuts were in effect:
1980 (under Jimmy Carter)
Tax Bracket Tax Rate
$0.00+ 0%
$3,400.00+ 14%
$5,500.00+ 16%
$7,600.00+ 18%
$11,900.00+ 21%
$16,000.00+ 24%
$20,200.00+ 28%
$24,600.00+ 32%
$29,900.00+ 37%
$35,200.00+ 43%
$45,800.00+ 49%
$60,000.00+ 54%
$85,600.00+ 59%
$109,400.00+ 64%
$162,400.00+ 68%
$215,400.00+ 70%
1986
Tax Bracket Tax Rate
$0.00+ 11%
$3,000.00+ 15%
$28,000.00+ 28%
$45,000.00+ 35%
$90,000.00+ 38.5%
1988
Tax Bracket Tax Rate
$0.00+ 15%
$30,950.00+ 28%
It should noted that Reagan also cut the corporate income tax rate by a whopping 25% (by 12 percentage points), from 46% to 34%--he cut it to 40% in 1987 and then to 34% in 1988. (And, to his credit, when Clinton came into office, he only raised the corporate income tax by 1 percentage point, to 35%, where it stayed until Trump cut it to 21% last year. The average corporate income tax rate in Europe and Asia is between 18% and 21%.)
Now let's see what happened to federal revenue after these massive tax cuts. Let's see what happened to federal revenue from 1983, after the recession ended, through 1989, keeping in mind that Reagan's 1981 tax cuts were phased in over a three-year period and that Reagan's second tax-cut bill, which cut taxes massively for all personal income over $45K, passed in 1986:
1983 -- $326 billion
1984 -- $355 billion
1985 -- $396 billion
1986 -- $412 billion
1987 -- $476 billion
1988 -- $496 billion
1989 -- $549 billion
To put these revenue hikes in percentages, federal revenue rose by a staggering 68% from 1983 to 1989. To put that in personal terms, imagine if you started a job in 2012 and your salary had risen by 68% as of this year--that would mean that your annual raises averaged over 11%!
Seriously, will liberals ever stop lying about the Reagan tax cuts? If they can't bring themselves to acknowledge the facts about the Reagan tax cuts, what hops is there that they will be truthful about the Trump tax cuts?
Setting the Record Straight About the Bush and Reagan Tax Cuts
Reagan tax cuts provide a valuable lesson
The Facts About Tax Cuts, Revenue, and Growth
Supply-Side Tax Cuts and the Truth about the Reagan Economic Record
Reaganomics, by William A. Niskanen: The Concise Encyclopedia of Economics | Library of Economics and Liberty
