After Reagan's first year in office, the annual deficit was 2.6% of gross domestic product. But it hit a high of 6% in 1983, stayed in the 5% range for the next three years, and fell to 3.1% by 1988. (By comparison, this year it's projected to be 9% but is expected to drop considerably thereafter.)
So, despite his public opposition to higher taxes, Reagan ended up signing off on several measures intended to raise more revenue.
"Reagan was certainly a tax cutter legislatively, emotionally and ideologically. But for a variety of political reasons, it was hard for him to ignore the cost of his tax cuts," said tax historian Joseph Thorndike.
Two bills passed in 1982 and 1984 together "
constituted the biggest tax increase ever enacted during peacetime," Thorndike said.
The bills didn't raise more revenue by hiking individual income tax rates though. Instead they did it
largely through making it tougher to evade taxes, and through "base broadening" -- that is, reducing various federal tax breaks and closing tax loopholes.
For instance, more asset sales became taxable and tax-advantaged contributions and benefits under pension plans were further limited.
"What people forget about Ronald Reagan was that he very much converted to base broadening as a means of reducing deficits and as a means of tax reform," said Eugene Steuerle, an Institute Fellow at the Urban Institute who had helped lay the groundwork for tax reform in 1986 and served as a deputy assistant Treasury secretary during Reagan's second term.
There were other notable tax increases under Reagan.
In 1983, for example, he signed off on Social Security reform legislation that, among other things, accelerated an increase in the payroll tax rate, required that higher-income beneficiaries pay income tax on part of their benefits, and required the self-employed to pay the full payroll tax rate, rather than just the portion normally paid by employees.
The tax reform of 1986, meanwhile, wasn't designed to increase federal tax revenue. But that didn't mean that no one's taxes went up. Because the reform bill eliminated or reduced many tax breaks and shelters,
high-income tax filers who previously paid little ended up with bigger tax bills.
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