Kennedy's & Reagan Tax Cuts

Paul Ryan’s went on to say in response to Joe Biden’s October 11, 2012 comments regarding taxes - the average tax in industrialized countries is 25%, the Canadians tax their people 15% (don’t forget they were coming across the border to buy goods and gas here and Republicans keeping knocking the Europeans for their deficits). Our plan is 1) don’t raise the deficit, 2) don’t raise taxes on the middle class, and 3) don’t lower the share of income that is borne by the higher income earners (in other words, the rich will continue to pay a lower rate of tax because they pay dollars – I’m still not going for this – some millionaires are paying nothing and this is not fair). Ryan said there were 6 studies (Romney said 5) that showed their plan was feasible (I’ve already addressed this lie). The Moderator, Martha Raddatz, asked if the Republicans had a specific plan for lowering taxes 20% across the board. Ryan said their plan raises about $1.2 trillion dollars through taxes and foregoes about $1.1 trillion in loopholes (hello – this is a negative balance and in order to do so the middle class loopholes will also be closed) and they want to work with Congress to achieve this goal (Martha interrupted and said – with no specifics). Biden responded truthfully with reminding everyone that Romney said it was fair that he paid a lesser percentage of tax than a middle income person and exempted the interest carryover and capital gains loopholes. Ryan said both Kennedy and Reagan tried their approach (so let’s look at what happened).

The tax reform passed by Kennedy (after his death) cut the top tax rate from 90% to 70%. Kennedy wanted it at 65% if – 1) US corporations were to be taxed on all their profits, earned anywhere in the world, rather than the current system of allowing them to defer taxation until they bring those profits home. Kennedy in 1961 said "The undesirability of continuing deferral is underscored where deferral has served as a shelter for tax escape through the unjustifiable use of tax havens such as Switzerland". 2) The tax preferences for the oil and gas industries were cut. He in 1963 said "while these are complex as well as controversial problems, we cannot shrink from a frank appraisal of governmental policies and tax subsidies in this area." 3) Limiting itemized deductions for the rich, saying that they should receive the same benefit for things like charitable giving "as everyone else," instead of preferential treatment (which they still receive).

The strongest economic growth we've seen since then occurred in the 1990s under Democratic president, Bill Clinton, who did raise the top rate, albeit not to pre-Reagan levels (don’t forget Reagan raised the deficit 218% - his tax cuts didn’t allow for necessary spending). Reagan’s Tax Reform Act of 1986 sought to eliminate deductions, lower rates for the wealthy and significantly raise taxes on those earning less than $50,000 but the bipartisan final act set tax rates on capital gains at the same level as ordinary income like salaries and wages (not the case today). During Kennedy's time corporate taxes were twice today’s 35% rate and made up more than 20% of total revenue; today it's less than 10%. None of Kennedy’s reforms have been implemented and Reagan’s tax on capital gains is no longer equal to ordinary income. Taxes on the rich have been lowered yet Republicans propose returning to 1929 rates. History shows this does not work.