The real lessons of the 1986 tax reform
Republicans and Democrats have been talking about reforming the tax code foryears. However, as the deadline for the deficit super-committee draws near, these discussions have taken on a new degree of seriousness. Republicans like Herman Cain, who think that the best tax policy is the one that most closely resembles a computer game, have been advocating a general flattening of tax rates. Democrats like President Obama, who see taxes as a source of much needed revenue during a protracted recession, have proposed closing corporate loopholes and ensuring that millionaires pay something resembling their fair share.
More astute members of the media, like NPR for example (listen to today’s story here), have begun drawing interesting parallels to the 1986 tax reform legislation that, in effect, accomplished both of these tasks. According to what is becoming accepted history, Republicans and Democrats were able to put the interests of the country above both partisan politics and industry lobbying and come up with a fair compromise that, by implication, required a kind of leadership that is painfully absent among politicians 25 years later. Now, while there are some elements of this framing that are true and useful, I think that there is also quite a bit of danger in telling the story this way.
First off, let’s start with what’s good about the story. In 1986, even with a Republican Senate and a Republican President, it was possible to pass legislation that closed a number of corporate loopholes and significantly raised the capital gains tax. 25 years later, it’s not just hard to imagine Republicans going along with this, it’s hard to imagine a lot of Democrats supporting it either. I mean, at least in the part of the speech that NPR provides, Reagan sounds like he’s left of just about everyone in Congress besides Bernie Sanders and Dennis Kucinich. He even points out the injustice of millionaires paying lower tax rates than working people. These days, when President Obama proposes exactly the same thing, he’s a socialist attempting to foment class warfare.
Now, here’s what I think is problematic about this framing. First, the 1986 reform wasn’t just about raising the capital gains tax and closing a few corporate loopholes. This is the only piece of legislation in American history that decreased the top personal income tax rate while increasing the lowest rate. So, while the wealthiest individuals saw their tax rate practically cut in half (from 50% to 28%), the poorest Americans saw their tax rate increase from 11% to 15%. Talk about an anti-Robin Hood tax.
Second, we shouldn’t glorify what the Democrats got out of this compromise. From the very first day this bill was signed into law Republicans and, let’s be honest, in some cases Democrats, were already working with corporations to craft exemptions allowing them to get around the tax increases and the loophole closures. The Republicans won something that was hard to take back, while the Democrats got something that every year becomes more and more difficult to enforce.
Third, we need to be wary of the lessons that many in the media are telling us we should draw from this compromise. In most of the coverage I’ve seen, and this is certainly true of the NPR piece, the audience is led to conclude that compromises like this are no longer possible because of the dogmatism of both the left and the right. This is the same false message that the media, despite all evidence to the contrary, tried to sell us during the debt ceiling debate. It’s simply not true that both major parties are so set in their ways that they can’t compromise. Instead, we have a Democratic party that concedes almost everything before negotiations even begin and a Republican Party that prides itself on an unwillingness to compromise on anything, ever, under any circumstances.
So, like most stories, the key is really in the framing. This story, if uncritically accepted, could just fit into the false narrative of a bitterly partisan Congress in which each side is equally to blame. If that’s the dominant media framing then, as usual, the top 1% win and everybody else loses. However, the story of 1986 could be a story about how Republican heros like Ronald Reagan were not only willing to raise taxes and closeloopholes on big business, but actually believed it was the fair and just thing to do. If this is the story we’re told then the general public might begin to see how conservatives, with the help of the media, have moved public debate so far to the right that Democrats are now being accused of class warfare for adopting what were essentially Republican positions 25 years ago. If this story were to start getting out, we might see that it’s possible to start dealing with real problems, like massive wealth inequality, rather than just blaming the poor, the elderly, students, immigrants, public sector workers, etc. Then we might try doing things that actually get a country out of a recession, like putting money in the hands of students, workers, and people who actually create the demand that drives a functional economy. Wouldn’t that be nice?
-Zack
2 Notes/ Hide
- mysterysciencegirlfriend3000 reblogged this from passtherelish
- msenplace-blog liked this
- passtherelish posted this