Monday, March 26, 2012

Taxing Logic

He is arguably the most influential Republican alive and inarguably the most influential if blowhard talk show hosts don't count.

He is Grover Norquist, head of Americans for Tax Reform, which in 1986 formulated the Taxpayer Protection Pledge.       There is one pledge for state legislators and one for federal legislators, the latter of which has been signed by three Democrats currently serving in the U.S. Congress and by the vast majority of Repub officeholders.      It requires the signer to "ONE, oppose any and all efforts to increase the marginal income tax rate for individuals and/or businesses; and TWO, oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates."

Jon Stewart had his way with Norquist recently on The Daily Show (video below).     Norquist conceded he wouldn't have encouraged a primary challenge to President Ronald Reagan because he "didn't sign the pledge."     Moreover, he argued, Reagan "didn't want to raise taxes."

Perhaps it would have seemed hypocritical to the 40th President to have vowed never to raise taxes after he already had signed into law several tax increases, including, in 2002, the largest peacetime tax increase ever. Reagan adviser and supporter Bruce Bartlett contends that his boss never initiated a tax increase, yet gives him the credit for the flexibility to approve increases when necessary.     In 2003 he summarized

In 1982 alone, he signed into law not one but two major tax increases. The Tax Equity and Fiscal Responsibility Act (TEFRA) raised taxes by $37.5 billion per year and the Highway Revenue Act raised the gasoline tax by another $3.3 billion.

According to a recent Treasury Department study, TEFRA alone raised taxes by almost 1 percent of the gross domestic product, making it the largest peacetime tax increase in American history. An increase of similar magnitude today would raise more than $100 billion per year.

In 1983, Reagan signed legislation raising the Social Security tax rate. This is a tax increase that lives with us still, since it initiated automatic increases in the taxable wage base. As a consequence, those with moderately high earnings see their payroll taxes rise every single year.

In 1984, Reagan signed another big tax increase in the Deficit Reduction Act. This raised taxes by $18 billion per year or 0.4 percent of GDP. A similar-sized tax increase today would be about $44 billion.

The Consolidated Omnibus Budget Reconciliation Act of 1985 raised taxes yet again. Even the Tax Reform Act of 1986, which was designed to be revenue-neutral, contained a net tax increase in its first 2 years. And the Omnibus Budget Reconciliation Act of 1987 raised taxes still more.

The year 1988 appears to be the only year of the Reagan presidency, other than the first, in which taxes were not raised legislatively. Of course, previous tax increases remained in effect. According to a table in the 1990 budget, the net effect of all these tax increases was to raise taxes by $164 billion in 1992, or 2.6 percent of GDP. This is equivalent to almost $300 billion in today's economy.

When polls indicated Americans did not remember the Reagan presidency fondly, Norquist's Americans for Tax Reform initiated the Reagan Legacy Project, which helped reverse the perception of Ronald (6) Wilson (6) Reagan (6).       Now, Grover refers to "Republicans who vote for tax increases (as) rat heads in a coke bottle," damaging the GOP brand.    

As Republican politicians portray him, Ronald (6) Wilson (6) Reagan (6) was the tough guy who through a defense buildup and force of personality forced the Soviets to relinquish their power and dismantle their empire.       Somehow, though, RR was unable to tame Democrats and was unable to prevent those big bullies from imposing tax increases on the country.      It may make no sense, but it is the Republican Party we know today.

The Daily Show with Jon StewartMon - Thurs 11p / 10c
Grover Norquist

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