For Every Dollar of Tax Increases – Reagan Awaits His Just Deserts

The tax hike vs. spending debate is getting much attention in the media, but the battle is nothing new.  The progressive Democrats are suddenly concerned about the reduction in revenue that keeping tax rates at their current levels represents – yeah, I know .. maintaining the current tax rates doesn’t reduce anything.  True Conservatives are concerned about the spending increases in the Omnibus bill.  Middle-of-the-road Republicans and Democrats aren’t concerned at all and have had a hay-day putting billions of dollars of earmarks in to the $1 trillion spending bill.

The RINO’s and DINO’s are all thrilled with the tax compromise that was made between the GOP and White House.  What compromise?  To figure that out, let’s first show what each side gave in order to mend the tax rate fence:

According to the Congressional Joint Committee on Taxation’s December 10th report, Conservatives gave up:

• A 35% increase in the “death tax” that will hit family businesses hardest and double-tax money that has already been taxed (increases revenues by an estimated $67 Billion/year)
• Another 1 year increase in unemployment entitlement spending (increase in spending of an estimated $65 Billion)
• Biodiesel subsidy continuation – estimated $2 Billion/year in spending
• Energy efficient home subsidy – about $124 Million/year in spending
• Alternative fuel subisidy (does not include ethanol) – $202 Million/year in spending
• Ethanol subsidy – $4.8 Billion/year in spending
• Energy efficient appliance subsidy – $596 Million/year in spending

Progressives gave up:

• A tax increase  on everyone, especially on small businesses and the wealthy

What Conservatives picked-up

• Status quo tax rates (including the marriage penalty)

What Progressives picked-up

• Massive increase in the “death tax”
• Status quo on Billions in government subsidies
• $65 Billion increase in spending on unemployment benefits

Some compromise.  this agreement will cost the citizens of the United States of America an additional $892 Billion/year through 2015 due to run-away spending.  There is a tax increase in this bill and I there are absolutely no spending cuts.  If the left-wing extremists had actually given up something, subsidies on ethanol, biodiesel or other ineffective government spending would have been reduced.  A compromise might have been as simple as a one-for-one spending cut for tax increase.  To put it in historic terms, Reagan once agreed to tax increases only if each dollar of tax increase would be matched by three dollars in spending cuts.

Sometimes Reagan went along with a pragamatist like chief of staff James Baker, who persuaded the president to accept the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), which turned out to be the great tax increase of 1982 — $98 billion over the next three years. That was too much for eighty-nine House Republicans (including second-term Congressman Newt Gingrich of Georgia) or for prominent conservative organizations from the American Conservative Union like the Conservative Caucus and the U.S. Chamber of Commerce, which all opposed the measure.

Baker assured his boss that Congress would approve three dollars in spending cuts for every dollar of tax increase. To Reagan, TEFRA looked like a pretty good “70 percent” deal. But Congress wound up cutting less than twenty-seven cents for every new tax dollar. What had seemed to be an acceptable 70-30 compromise turned out to be a 30-70 surrender. Ed Meese described TEFRA as “the greatest domestic error of the Reagan administration,” although it did leave untouched the individual tax rate reductions approved the previous year. (TEFRA was built on a series of business and excise taxes plus the removal of business tax deductions.)

Some things never change.  If we strip away the status quos, this “compromise” increases taxes by $67 Billion/year and increases (not decreases) spending by$65 Billion a year.  To be a Conservative win, this compromise should have resulted in $201 Billion in spending reductions ($3 spending cuts for each $1 of tax increases).  Does anyone really think that if we give Washington D.C. more money, it will somehow result in deficit relief?

Reagan would like his $3 dollars now.