From: pjm@anegada.sps.mot.com (Patrick J. McGuinness)
Subject: Re: Derailing the Reagan Revolution, part 2: Seven more years?
Organization: Motorola Inc., Austin TX
Date: Tue, 25 Aug 1992 17:36:45 GMT

demon@desire.wright.edu (Stupendous Man) writes:
>rja@redwood26.cray.com (Russ Anderson) writes:
>> demon@desire.wright.edu (Stupendous Man) writes:
>>> rja@redwood26.cray.com (Russ Anderson) writes:
>>> > demon@desire.wright.edu (Stupendous Man) writes:
>>> ...      
>>> >> 	Another thing people conveniently forget is what that 1986 tax raise
>>> >> was supposed to do.  It was supposed to be used to take a bite out of the debt. 
>>> >> Hmmm.  I wonder where those dollars went?
>>> > 
>>> > Are you saying that Ronald Reagan was *wrong* for raising the capital gains tax?
>>> 	(And yes, he was wrong to go along with it.)
>
>	^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
>> 
>> So now, was  Ronald Reagan was *wrong* for raising (proposing, with the congress 
>> going along with him) the capital gains tax?

The implication that Reagan proposed the cap gains tax increase is wrong.
As explained by Beryl Sprinkl last night on McNeil-Lehrer,  they agreed
to cap gains increase only because the Congressional Democrats insisted on it,
as part of the need for "revenue neutrality".  In other words, a real tax cut
without countervailing increases wasn't acceptable to the Democrats.

Well, a funny thing happened on the way to the IRS.  As noted by Brett
in various posts, the cap gains tax increase failed to raise significant
new revenue. In fact, because of its negative impact on the creation
of new jobs, and its *disasterous* effect on housing investment,
this "increase" cost our economy, and our Government, a lot of wealth
and revenue.

Meanwhile, the income tax cuts *did* pretty much pay for themselves.

So yes, increasing the cap gains tax was a mistake.

It was also a mistake in 1989 for George Mitchell to refuse to pass Bush's
request to cut it. It was a mistake in 1992 for Congress to rebuff
Bush's request (again) to cut the capital gains tax, and it is a mistake
today for Clinton to propose income tax increases and no broad-based long-term
capital gains tax cut.

>	Every couple of years congress comes to the president and pleads
>poverty, "if only we had a few more dollars, we could get rid of this terrible
>debt".  Sure the Presidents are dunces for continuing to be suckered by these
>con men.  Reagan at least got one good thing in 1986: the top marginal rate was
>lowered to 28%.  This event in itself help the boom continue until 1990. 
>However a lot of Democrats (including our local newspaper) have it backwards. 
>They think "the raise in taxes" did it.  And as Arthur Laffer said, you don't
>lower corporate taxes with gimmicks, you lower them with lower rates.

>	The 1986 act was not bad in and of itself, there were good parts and
>bad parts.  The tragedy is that congress was entrusted to reduce the debt. 
>Which they did not do.

Agreed. However, to Reagan's and Congress' credit, you will find
that the debt relative to GNP stopped growing in '87 and '88.
Coincidentally, spending increases were quite restrained for those
years. *That* is how to cut the deficit .... simply halt spending increases.

>	In the last 100 years we've have four "boom" periods.  Each and every
>one resulted from (in part) taxes being lowered.

We got 1920's (1924-1929, Coolidge tax cut) 1960's (1964-1969, Kennedy
tax cut) and 1980's (1983-1989, Reagan tax cut).
So what's the 4th boom period?

---
Pat

>	Then ask him why he doesn't want to cut spending instead.

	- Someday this will be written as an epitaph to a civilization.
	- Hopefully not ours.
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