Says Ronald Reagan "understood repeatedly that when the deficit started to get out of control, that for him to make a deal he would have to propose both spending cuts and tax increases."
It used to be only Republicans who enjoyed repeating over and over again, "Ronald Reagan! Ronald Reagan! Ronald Reagan!" Now Democrats are getting in on the Reagan name game, too. In answering questions before a meeting of the Newspaper Association of America, President Barack Obama invoked Reagan’s name as a model of fiscal prudence. He started off bashing Republicans, both those in Congress and those running for president, for refusing to consider increased tax revenues as a way to reduce debt and deficits. "The challenge we have right now is that we have on one side, a party that will brook no compromise. And this is not just my assertion," Obama said. Specifically, he noted a moment during the Republican presidential debates when every candidate raised a hand to indicate an unwillingness to accept budget deals with tax increases. Then Obama invoked the Gipper. "Ronald Reagan, who, as I recall, is not accused of being a tax-and-spend socialist, understood repeatedly that when the deficit started to get out of control, that for him to make a deal, he would have to propose both spending cuts and tax increases. Did it multiple times. He could not get through a Republican primary today," Obama said. So did Reagan propose tax increases as part of his budget deals? We decided to dive into history to fact-check the statement. (We asked the White House for evidence, but we didn’t hear back.) We should start by noting that if you remember Reagan as a tax cutter, your memory is good. Reagan supported cutting taxes and talked about it frequently. Under his watch, marginal tax rates decreased from top rates of 70 percent in 1981 to 28 percent in 1988. But Reagan also signed off on numerous tax increases, especially when it looked as if the previous tax cuts were driving overall tax revenues below expectations. The largest increase was the Tax Equity and Fiscal Responsibility Act of 1982, or TEFRA. It didn’t increase the top income tax rate, but it did increase tax revenues by tightening various rules. In 1983, he signed off on legislation to keep the Social Security program funded by raising payroll taxes and taxing Social Security benefits for some higher earners. Reagan also signed laws that modestly increased taxes or tax revenues in 1984, 1985, 1986 and 1987. To measure the overall impact of tax changes, economists prefer to look at tax revenues as a percentage of the overall economy, which is Gross Domestic Product, or GDP. Under Reagan, overall tax revenues were 19.6 percent of GDP in 1981. That number dropped during Reagan’s first term but increased slightly during his second. In 1988, his last year in office, tax revenues were 18.2 percent of GDP, according to the nonpartisan Tax Policy Center. Economist Bruce Bartlett reviewed Reagan’s tax record, both as president and as governor of California, for a 2011 article in Tax Notes, a respected tax publication. Bartlett noted that Reagan wasn’t exactly enthusiastic about tax increases. "As with his California tax increases, Reagan had little to say about them afterwards. In his diary, he wrote only that the TEFRA bill was ‘the price we ha(d) to pay to get the budget cuts.’ He later tried to repudiate his consistent support for tax increases after 1981. But it’s clear that getting control of the deficit in the 1980s required both spending cuts and higher revenues." Bartlett concluded, "Although he cut taxes when he could, he raised them when he had to. That’s something today’s self-styled Reaganites should remember." One thing troubled us about the wording of Obama’s statement. He said Reagan "repeatedly" would "propose both spending cuts and tax increases." Most of the analysis we reviewed indicated that while Reagan signed off on tax increases proposed by Congress, he did not often propose those tax increases himself. Still, Reagan definitely advocated in public for closing tax "loopholes" as part of pending deals, and he could wax eloquent on tax fairness. One example: Back in 1985, Reagan delivered extended remarks on tax policy to an audience of high school students in Atlanta. "Now, someone might say it's odd to talk about tax policy with young people in their teens. But I don't think so," Reagan said. "You not only understand what taxes are, what effect they have in the average person's life, but if you don't understand, you will pretty soon, when you get your first job." Reagan then described the tax breaks he was proposing for families before moving on to tax "loopholes." "We're going to close the unproductive tax loopholes that have allowed some of the truly wealthy to avoid paying their fair share," he said. "In theory, some of those loopholes were understandable, but in practice they sometimes made it possible for millionaires to pay nothing, while a bus driver was paying 10 percent of his salary, and that's crazy. It's time we stopped it. "And the way I see it, if our current tax structure were a TV show, it would either be Foul-ups, Bleeps and Blunders, or Gimme a Break. If it were a record album, it would be Gimme Shelter. If it were a movie, it would be Revenge of the Nerds or maybe Take the Money and Run. And if the IRS, Internal Revenue Service, ever wants a theme song, maybe they'll get Sting to do, ‘Every breath you take, every move you make, I'll be watching you.’" And with that 1980s pop culture flashback over, we’ll now move on to our ruling. Our ruling Obama said Reagan "understood repeatedly that when the deficit started to get out of control, that for him to make a deal he would have to propose both spending cuts and tax increases." Reagan typically did not make tax increases part of his own proposals. But he did approve and even advocate for budget deals that included increases to tax revenues, and he spoke of tax fairness in ways that contrast sharply with today’s Republicans in Congress. We rate Obama’s statement Mostly True.
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