The year is 1982 and the economy, rather than surging, is in a recession as the tax reductions on the fiscal side passed the year before, although the largest in history, prove insufficient to counter the interest rate raising by the Federal Reserve, a move Reagan backed Fed Chair Paul Volcker on, to combat high inflation. Although inflation goes down, so does the economy and the United States is facing a major budget shortfall. Calls for tax increases and budget reduction abound, and in the House Rep. Pete Stark (D-Calif.) introduces the Tax Equity and Fiscal Responsibility Act.
One of the lesser known Reagan legacies that gets brought up, mostly by liberals, is that he raised taxes through this law in 1982 as an example of why Republicans should be more flexible about raising them. That he signed this into law is true, but when we look at the votes and the breakdown the narrative gets…complicated. There were numerous otherwise quite staunch conservatives who voted for this and some otherwise very staunch liberals who were opposed to it. Both the ACU and the ADA counted the House vote for this legislation, with ACU finding it against and ADA finding it for their respective ideologies. House Democrats went for the legislation 123-118 while Republicans did so 103-89. The most interesting and vexing on the surface is the Senate vote, however, in which Republicans voted 43-11 in favor and Democrats 9-35 against. This means that in total, more Republicans supported this tax hike than did Democrats, and more Democrats opposed this tax hike than did Republicans. While on the Republican side you have some of the usual suspects voting against like Barry Goldwater of Arizona and Jesse Helms of North Carolina, you also have some unlikely senators voting for with major conservative bonafides like Bill Armstrong of Colorado, Steve Symms of Idaho, Strom Thurmond of South Carolina, and John Tower of Texas. William Roth of Delaware, the Senate sponsor of the 1981 tax reduction, voted for this legislation. The Democrats against included Senate Minority Leader Robert Byrd of West Virginia, Senator Joe Biden of Delaware, and some strongly liberal Democrats in Senator Howard Metzenbaum of Ohio and Paul Sarbanes of Maryland. There were of course some notable liberals who voted for this measure, including Alan Cranston of California, Gary Hart of Colorado, Ted Kennedy of Massachusetts, and Bill Bradley of New Jersey. Stark, its House sponsor, was well known for his advocacy for numerous left-wing causes. Rep. Al Gore (D-Tenn.) votes for it too. A part of this that really isn’t known is why would many Democrats who were such critics of Reagan’s 1981 tax cuts vote against raising taxes the following year and why would Republicans who were so gung-ho for tax reduction the previous year raise them? These are questions I intended to answer today.
For Republicans: The Persuasive Power of Bob Dole and Belief in Budget Reduction
The chief advocate for the tax legislation in the Senate was Finance Committee Chairman Bob Dole (R-Kan.). He proved a master of framing in how he pitched this legislation, asserting that this bill was a way to crack down on tax dodgers and cheaters. He stated the difficulty of his task to the American Bar Association on May 15th, “It is a pleasure to be here this afternoon to talk about taxes. Not that taxes are the most pleasant thing to discuss these days – lately every time I mention taxes I have a lurking fear that the next day I will be accused of having destroyed another industry or driven some company into bankruptcy” (Robert Dole).
Dole worked out a package in which the corporate tax is increased, the telephone service tax is tripled, the federal cigarette tax is increased, and more medical spending is required before people can deduct it from their taxes while canceling some scheduled tax reductions. Additionally, rules were tightened on “deprecation, leasing, contract accounting, and investment tax credits” (Fox). Taxes were raised overall by this measure by a factor of $98 billion with a $15 billion cut in entitlement spending.
Naturally, there were some Republican opponents to this approach. Rep. Newt Gingrich (R-Ga.), at the time regarded simply as a partisan bomb thrower, blasted him as the “tax collector of the welfare state” (Ponnuru). Jack Kemp (R-N.Y.), the House sponsor of the 1981 tax reduction, also voted against. Senators Paula Hawkins (R-Fla.) and Jesse Helms (R-N.C.) speak out against the measure. The former broadly opposed the legislation while Helms opposed the idea of raising taxes during a recession as well as the cigarette tax hike. Many Republicans voted for this legislation under the belief that the Democratic Congress would act further to control spending. President Reagan agreed provided $3 in spending reduction would occur for every $1 increase in taxes, but this ultimately never materialized for reasons that are disputed.
Republican senators who spoke for the increase included Steve Symms of Idaho, Chuck Grassley of Iowa, Bob Dole of Kansas, and Strom Thurmond of South Carolina. Thurmond emphasized the necessity of deficit reduction and stated his preference for a bill that cut more spending and taxed less. The Republicans who spoke against the measure were Paula Hawkins of Florida and Jesse Helms of North Carolina. Hawkins broadly opposed the legislation while Helms regarded raising taxes during a recession as problematic and not learning from the mistakes of the presidency of Herbert Hoover.
For Democrats: Too Many Taxes on the Little People
Although many Democrats were appreciative of certain loophole closings that occurred with this measure, their objections to some ways in which revenue was raised was sufficient motivation for them to vote against. Some of the key revenue raising mechanisms included increases in the cigarette tax and a tripling of the telephone tax. Minority Leader Byrd thought the latter a particularly burdensome way to raise revenue. He stated, “This tax bill still means that the average taxpayer must pay more in medical expenses, before he can deduct them from his taxes. This tax bill still triples the tax on telephones. And together, these two provisions will add more than $7 billion to our taxes over 3 years” (22416).
Howard Metzenbaum of Ohio, one of the Senate’s most staunch liberals, praised Dole’s leadership on the matter and stated his agreement with some loophole closings, but found the bill to not be equitable enough. He held that “the failure of the conferees to do that which the Senate had instructed them to do in connection with the extension of unemployment benefits makes this Senator conclude that, on balance, it does not warrant my voting for the measure” (22415). His Ohio colleague, Senator John Glenn, likewise opposed the bill. He charged that “The President’s message and his new tax bill perpetuate the cruel hoax of Reaganomics. They promise a balanced budget and economic prosperity while adding to our national debt and casting the dark shadows of joblessness across our land” (22419) Dennis DeConcini of Arizona, one of the moderates, spoke out against the bill in almost its entirety, and noted that the IRS bureaucracy would be increased. Indeed, it seems like the conservative wing of the Democratic Party really lacked motivation to back this measure as they largely lined up against it in the House and entirely lined up against it in the Senate.
I find it ironic that contemporary Democrats like to invoke this law when many of theirs opposed it, including the current president as well as a number of the party’s most liberal members. This is probably something the liberal talking pointers don’t know and honestly, I don’t judge them real harshly for this, as looking into this admittedly complex piece of tax legislation is a bit of a deep dive and I don’t expect most to undertake it. What’s more, it is particularly striking about the atmosphere of this debate that the perception of Reagan we see is considerably different than his legacy among many Americans, as he is unpopular, and the possibility looks real at this time that he has failed as a president and won’t win another term. Indeed, 1982 was the worst year of his presidency and the Republicans lost 26 seats in the House in the midterms, with the recession hitting its peak in November and December. You would have no idea at this time that Reagan would preside over economic recovery (and yes tax reduction was a factor) and growth from 1983 to the end of his presidency and win a 49-state landslide in 1984.
Conference Agreement – Tax Equity and Fiscal Responsibility Act of 1982. (1982, August 19). Congressional Record.
Click to access GPO-CRECB-1982-pt16-4-2.pdf
Fox, J. (2017, December 15). The Mostly Forgotten Tax Increases of 1982-1993. Bloomberg.
Legacy of Leadership: Taxes & Budget. Robert Dole.
Ponnuru, R. (2012, December 28). Republicans and Taxes. National Review.
Sahadi, J. (2010, September 12). Taxes: What people forget about Reagan. CNN Money.
Sanders, K. (2015, September 25). Stephen Colbert – Says Ronald Reagan “reversed his world’s ‘largest tax cut’ and raised taxes when revenues did not match the expectations.”. Politifact.
To Agree to the Conference Report on H.R. 4961. (Motion Passed). Govtrack.
To Agree to the Conference Report on H.R. 4961. (Motion Passed) See Note(s) 35). Govtrack.
One thought on “The Less Known Side of the Reagan Tax Increase of 1982: Why Many Republicans Supported It and Why Many Democrats Opposed It”
Bob Dole Ultimate Washington Insider Passed This. Spending Cuts Failed To Materialize… Only The Taxes Were Real! Imagine That. One Of The Reasons Dole Proved To Be A Lousy Presidential Candidate. Lesson About Compromises With Liberals. You Might Add Simpson -Mazzoli To The List. Brings Back Bad Memories. Wacky Wednesday From Dave IN TEXAS.