It’s not 1981 anymore. That’s the message of an editorial in the conservative Weekly Standard, which warns Republicans not to design a tax reform patterned on the one that Ronald Reagan signed in his first year as president.
Mimicking the Reagan tax cuts is a temptation both because of Republicans’ enduring admiration for the 40th president and because his program has been the source of the economic ideas they have championed ever since his time in office.
But the Standard is right that times have changed. That doesn’t mean the Gipper’s basic disposition toward lower and less onerous taxes needs to be junked. It means that today’s Republicans (and Democrats!) need to grapple with four differences between our time and his.
First: The federal debt is much larger now, and looks to grow larger still. When Reagan took office, that debt stood at 31% of GDP. It’s now about 103%. The Baby Boomers were still entering the workforce then. Now that they are leaving it, the debt picture we can anticipate is much worse.
Reaganites would have preferred it if spending restraint had accompanied tax cuts, but they were willing to accept rising deficits rather than give up those tax cuts. That trade-off looks worse in our current fiscal position.
Second: The top individual income tax rate is a lot lower than it was in 1981. Reagan inherited a tax code with a top rate of 70%. His tax legislation lowered it to 50%, and by the time he left office he brought it down to 28%. It is now roughly 40%.