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  Tax Rhetoric, Reality and Revisionist History
by Gary Schneider, TheRealityCheck.org
8
February 2003

An examination of the tax policies of Reagan, now being repeated by Bush, and the usual criticism from the Left.

 
I recently purchased an electronic educational toy for my daughter that provides all the standard historical information you would expect about the U.S. Presidents … dates, background, Party affiliation, basic facts, etc.  However, this particular product, made by Scientific Toys, Ltd., provided something a bit more … a revisionist history lesson.  We studiously began pressing all the picture buttons of the major U.S. Presidents ... and then we reached President Ronald Reagan. Here’s what it said:

“Reagan, ... was known as the Great Communicator, because of his skillful use of television to communicate with the American people.  His policy of cutting taxes while greatly increasing military spending resulted in HUGE (emphasis on huge) budget deficits,  (footnote) although it did lead to the end of the Cold War with the Soviet Union”

Now, by Contrast, here’s what it said about Bill Clinton:

“Clinton presided over a sustained period of economic growth.  He supported Healthcare and Welfare Reform, the North American Free Trade Agreement and a Balanced Budget Amendment.  Clinton was the 2ndUS President to be impeached, but not convicted.  His wife, 1stLady Hillary Rodham Clinton, was elected to the U.S. Senate at the end of his 2ndterm”.

So lets see - Reagan was good on TV and caused HUGE budget deficits…although he did help to end the Cold War; While Clinton, on the other hand, reformed Healthcare, Welfare, Free Trade, was elected to two terms and had a wife who went on to the U.S. Senate to boot!  Though, he was the 2ndpresident to be impeached ...oh, but not convicted.

Now, I understand that selective memory and the intentional distortion of historical reality is standard fare for Democrats.  It is, after all, a significant contributing variable in their ability to win elections.  But, I have to admit, I expected less spin and fewer half-truths on a child’s educational toy. 

In any case, the positions noted by this toy are quite timely given President Bush’s recent Reaganesque tax cut proposal... Particularly as we are  now beginning to hear the same lies, half truths and hysterics from the Left in opposition to it.

TheRealityCheck

In 1980, when Jimmy Carter (D-Georgia) left office, the United States was in an economic, political, psychological and patriotic malaise.  We had soaring unemployment, double-digit inflation and a contracting economy.  A belief that America was in permanent decline had set in with many Americans.

Come President Ronald Reagan.  Under his leadership, taxes were significantly reduced prompting one of the greatest peacetime economic expansions in American history.  For seven years the economy grew at 4% a year on average.  Inflation plummeted down, interest rates were cut in half and 20 Million new jobs were created.  The Dow Jones Industrial Average was up 240% as new businesses were created and existing ones flourished. This also significantly increased the worth of American’s pension plans and investments … and yes - we won the Cold War.  Our swagger was back – economic strength, military strength, confidence, patriotism and optimism restored.

The economic policies implemented under Reagan are as valid today as they were back in 1980.  The Heritage Foundation’s Andrew Olivastro points out in his web memo #162, that higher taxes do not raise more federal revenue, lower taxes do.  “Its simple: lower tax rates = more robust economy = more federal revenue”.  The economy drives the budget, not the other way around. The idea here is to maximize economic growth, not tax revenues. From 1980 to 1990 tax revenues actually increased by nearly 28% following the 5% tax cut in 1981 (retroactive), a 10% cut in 1982, and 10% in 1983.  That’s an increase of about $102 billion per year for 10 years (in constant 1996 dollars.  source:  Calculations by The Heritage Foundation, with data from OMB Historical Table 1.3).  The reality is that the budget deficit grew primarily due to the insatiable spending demands of congressional Democrats and the Democrat controlled House in particular.  Democrats know this, the media knows this … yet you will have to deliberately and independently seek this out. 

This positive economic climate, created by President Reagan, was largely carried on by President George HW Bush and was kept in check by a Republican controlled Congress, under the leadership of Newt Gingrich (R- Georgia), following the Republican election landslide of 1994.  Welfare Reform and Free Trade Agreements were also the hallmark of this Republican Congress. This, despite early and aggressive attempts by the Clinton Administration to turn back the clock.  Reaganomics have sustained the economy to this day. 

Now, President Bush, through a series of new and aggressive tax reductions, seeks to revisit this level of accelerated growth.  The irrefutable facts regarding the economic benefits of tax cuts for all Americans is starting to take hold even among Democrats as evidenced by their own tax-cut counterproposal.  Though unimpressive, it does represent a philosophical concession.  However, old political strategies die hard, and the politics of division have once again taken center stage.  

Class Warfare
Having effectively lost the battle of economic reality, the Left has polished up their tried and true tactics of division by race and class.  The oft heard class warfare chants are being repeated across the airwaves in order to promote the notion of legitimacy, but again, facts will be their undoing.

The facts are that the share of taxes paid by the highest 20% of income earners has increased by nearly 16% since 1983 while, during this same period, taxes paid by the lowest 20% of income earners has decreased by almost 35% (source:  The Heritage Foundation, Taxes and Tax Rates, Chart T-4/Original data from Congressional Budget Office).  Indeed, a far more legitimate position is that those who create jobs and wealth are being unfairly and disproportionately taxed.  Also worthy of note is that during the Reagan Administration the top Individual tax rate declined from 70% to 28% (Heritage Institute, Taxes and Tax Rates, Chart T-1).  More Facts – in 1999 the top 10% of households paid 66% of Fed Income Tax while the bottom 50% of households paid only 4% of Total Federal Income Tax (source:  The Heritage Foundation, Taxes and Tax Rates, Chart T-5). 

Either way you cut it, all Americans are being taxed too much.  Per capita taxes have continually increased in the 40 years from 1960 to 2000.  Individual income taxes are nearly $3,500 higher per taxpayer, and all taxes are over $3,200 higher per capita, than they were under President Kennedy (source:  The Heritage Foundation, Taxes and Tax Rates, Chart T-3). …. And what more do we really have to show for it.   Conservative tax policy promotes economic growth, increases federal revenue, reduces the tax burden and promotes greater economic independence for all Americans.

____________________________________

Gary Schneider is the President and founder of TheRealityCheck.Org, Inc., a Conservative policy advocacy group established to promote and defend conservative social, political and economic principles nationally, through the origination and dissemination of commentary, analysis, news and research tools via the public Internet and other channels.  TheRealityCheck.Org, Inc. is located in Shelton CT. 

Schneider received his degree in Government and Russian Studies at Norwich University’s Military College of Vermont, the nations oldest private military academy.  At Norwich he held numerous leadership positions within the Corp of Cadets.  In 1989 Schneider moved to New York, where he initially conducted financial research for various on-line and print publications used by Wall Street investors.  Since that time, he has built and led research teams and oversaw the creation of global financial research and news products for some of the largest media organizations in the world to include Thomson Financial and, for the last 9 years, as a Vice-President for Reuters, the worlds largest news and television agency.  Schneider has also attended executive leadership training at the University of Michigan and received a certificate in e-Commerce from New York University.

During his 14 year career, Schneider has traveled extensively to Europe and throughout the United States.  In addition to Politics and Finance, his hobbies include fitness, mountain-biking and is actively involved in his Church.