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  • Bipartisan Tax Reform? It Happened in 1986

    Whenever Washington leaders start talking about the economy, they like to refer to deals and legislation from years past. In the latest fiscal cliff talks, the Tax Reform Act of 1986 has come up. Why?

    A series of talks on how the impending fiscal cliff might be avoided kicked off when President Obama and congressional leaders met for their first meeting the two weeks ago. House Speaker John Boehner (R-OH) restated his vow to accept higher revenues—but only if they resulted from tax reform generating a stronger economy, and thus more revenue. He added that any additional revenue must be accompanied by cuts to entitlement programs such as Social Security, Medicare and Medicaid. With just weeks before the end-of-the-year deadline—when a series of tax hikes are set to take effect just as billions in automatic spending cuts stipulated in the 2011 debt ceiling deal take effect—the fiscal policy stakes have never been higher.

    Just a short time ago in his post-election remarks, Speaker Boehner pointed to the bipartisan Tax Reform Act of 1986 as the model for what is possible:

    There is an alternative to going over the fiscal cliff, in whole or in part…A stronger economy means more revenue, which is what the president seeks…There’s a model for tax reform that supports economic growth. It happened in 1986 with a Democratic House run by Tip O’Neill and a Republican president named Ronald Reagan.

    So why this hearkening back to 1986? What happened?

    • The Tax Reform Act of 1986 was a bipartisan effort to reform the tax system.
    • As of 2012, it is the most recent major simplification of the tax code.
    • It reduced the top individual rate from 50 percent to 28 percent and the top corporate rate went down from 48 percent to 34 percent.
    • It reduced rates without reducing revenues by broadening the bases of both the individual and corporate income taxes—by eliminating the wide variety of tax deductions, credits, and similar special provisions.

    When Ronald Reagan signed the Tax Reform Act of 1986 into law, he said: “Fair and simpler for most Americans, this is a tax code designed to take us into a future of technological invention and economic achievement, one that will keep America competitive and growing into the 21st century.”

    What happened next? Many argue the Tax Reform Act of 1986 ushered in a more economically neutral tax system, which in turn strengthened the economy for the long run and ultimately meant more revenues for the government.

    With presidential leadership, the conditions may be right for another sweeping reform of the tax system. Certainly, there is a growing bipartisan interest in corporate income tax reform. If so, the 1986 law offers a fair model.

    Posted in Featured [slideshow_deploy]

    7 Responses to Bipartisan Tax Reform? It Happened in 1986

    1. Haditwgov says:

      Zero doesn't want bipartisan solutions, he wants division.

    2. shane says:

      The only way we will win is if we use TV spots now, to educate the lib's

    3. Bobbie says:

      I just don't get why special interest aren't the first to be cut? Special interests are not a need to survive and serve no purpose but those interested that government favors by discrimination. The responsibility of costs for special interests are rightfully the responsibility of those interested as interests have already proven susceptible to conflict with the true [principles of Americans as the government has no constitutional right to spend America's money discriminatingly. It violates America's principles and so seem the special interests funded without consent by Americans. Entitlements are already paid. Special interests get their funding by underhanded government allocating funds from entitlements for one example…

    4. Lloyd Scallan says:

      In 1986 a Marxist was not the nation's first dictator. In 1986, Boehner was not speaker. In 1986 Repbulicans had honor and guts and wanted to repersent the wishes of the people. This is not 1986!

    5. Nealr says:

      Bipartisanship as interpretated by Obama & Reid means do what I tell you. They don't need input from Republicans. That is how we got Obamacare with all Republican input voted down in committees.

    6. tomdryan says:

      The Neutral Tax is the most neutral, fair and non-partisan tax plan of all. The 1986 reforms were beneficial, but The Neutral Tax will solve the federal tax reform permanently, You can learn more about it at neutraltax (dot) com.

    7. tina says:

      We need the credit card deduction.

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