From: rja@redwood26.cray.com (Russ Anderson)
Subject: Re: Derailing the Reagan Revolution, part 2: Seven more years?
Originator: rja@redwood26
Organization: The 1991 World Champion Minnesota Twins!
Date: 26 Aug 92 08:05:22 CDT


In article <1992Aug25.225323.3745@desire.wright.edu>, demon@desire.wright.edu (Stupendous Man) writes:
> In article <1992Aug25.143607.27167@hemlock.cray.com>, rja@redwood26.cray.com (Russ Anderson) writes:
> > In article <1992Aug25.173645.16913@oakhill.sps.mot.com>, pjm@anegada.sps.mot.com (Patrick J. McGuinness) writes:
> >> demon@desire.wright.edu (Stupendous Man) writes:
> >> >rja@redwood26.cray.com (Russ Anderson) 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.
> >> >> 
> >> >> 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.
> > 
> > Huh?  The proposal came out of the Reagan Administration (specificly the Treasury 
> > Dept, championed by Donald Regan).  Remember Reagan talking about trying
> > to simplify the tax code so that people could file on a postcard?
> 
> 	Tax simplification, yes.  But the end result (which embodied
> "simplification") was the Rostenkowski-Darmon Tax Reform Act.

OK.  But did "tax simplification" have a seperate rate for capital gains?
I don't think it did.

> >> 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.
> > 
> > Interesting.  I was an econ undergrad when the original proposal was 
> > announced and remember spending quite a bit of time discussing the
> > implications on the economy.  There were changes made at the request of
> > congress (such as mortgage interest remaining deductable) but taxing cap
> > gains at the same rate as all other income was part of the original
> > proposal.  I suspect that the election year has clouded Beryl Sprinkl's
> > memory.
> 
> 	Well, yeah.  But all Reagan wanted to do was simply the tax process.  I
> doubt whether he was the guy to say "let's raise Cap Gains while we're at it".

Well yea, I don't think Reagan would understand that taxing all income 
at the same rate means (by definition) taxing capital gains at the same
(not lower) income tax rate.  I can also see Reagan preaching against 
"tax loopholes" and then not understanding why exemptions (such as for
consumer interest payments) were eliminated.

It's not unlike Reagan talking about spending cuts, but when asked (such 
as by David Stockman) which specific programs to cut Reagan would say 
"Well, no, we can't cut that" (as if there was a budget line for "waste 
& pork").  Reagan had broad goals but no concept of how those goals 
translate into the nitty-gritty reality.

Reagan had a bundle of "nice ideas" that were often contradictory, but
not the logic skills to see the inconsistencies.  Wanting a flat tax
and also a lower rate for capital gains is probably a good example.

> 	Let the companies themselves decide whether job training, new
> factories, etc. is the way to go.  Those that do it right will succede and the
> others will immitate them.

Let people decide for themselves whether to spend, save or invest their 
money.  A flat tax lets people decide, based on market conditions, what 
will be their best economic choice.  The capital gains tax distorts the
market, with the government deciding which choice it thinks is best.

-- 
Russ Anderson    |  Disclaimer: Any statements are my own and do not reflect
------------------              upon my employer or anyone else.  (c) 1992
EX-Twins' Jack Morris, 10 innings pitched, 0 runs (World Series MVP!)