Celebrating 40 Years of the Reagan Tax Cuts

AMAC Exclusive By: Seamus Brennan

In the wake of President Biden’s repeated calls for one of the largest tax hikes ever proposed and Senate Democrats’ introduction of the largest spending bill in United States history, America today commemorates the 40^th anniversary of President Ronald Reagan’s revolutionary 1981 tax cuts.

The Economic Recovery Tax Act of 1981, passed during Reagan’s first year in office, has long been celebrated by conservatives as a flagship of the Reagan era and credited by many economists as having generated the historic economic gains of the 1980s and ‘90s. The Act consisted of a 25 percent reduction in tax rates for all Americans and, in conjunction with a 1986 tax reform effort, ultimately slashed the highest level of marginal tax rates from 70 percent to 30 percent. Following enactment of the bill, 14 million new jobs were created over a five-year period, American incomes increased by more than 22 percent over the next seven years, and the economy grew by an average of more than 3.5 percent for the rest of the decade.

The 1986 tax cuts cultivated lasting economic prosperity that reversed the stagnation of the Carter years and introduced the blueprint for conservative tax policy and economic freedom for years to come. Reagan’s tax cuts popularized the now-dominant theory of supply-side economics, incentivized innovation and entrepreneurship on a national level, and established the framework for President Trump’s 2017 Tax Cuts and Jobs Act, which led to arguably the greatest American economy on record.

Yesterday, the Heritage Foundation and the Committee to Unleash Prosperity co-hosted a public webinar commemorating the Reagan tax cuts. Moderated by former Reagan and Trump administration economic advisor Larry Kudlow, the event featured a panel of Reagan administration alumni including Anthony Dolan, former chief speechwriter for President Reagan; Steve Forbes, head of Reagan’s Board of International Broadcasting and current CEO of Forbes, Inc.; Arthur Laffer, a member of Reagan’s Economic Policy Advisory Board; former Attorney General Ed Meese, and Stephen Moore, a member of Reagan’s Privatization Commission. Also on the panel was Judy Shelton, a former economic advisor to President Trump.

“America was on the defensive in the 1970s,” Kudlow said during the webinar. “And that all changed in the Reagan years,” he continued, citing the United States’ prominent international position as Reagan’s greatest legacy. Forbes echoed this sentiment, urging the Biden administration to avoid the mistakes of the Carter era not only for economic reasons, but for reasons of “morale” and world leadership: “Let’s turn it around and not make the same mistakes again,” he said.

In an interview with AMAC Newsline, Dolan said the Reagan tax cuts “changed everything.” Their significance, he said, derives from their success in proving why the individual person, left to his or her own devices, can make better decisions for their own life than far-away bureaucrats in Washington: “If you let market forces take over and not have a bunch of philosopher-kings trying to interfere with them, and get people back their money, and let them spend and create,” Dolan said, it shows that “consumers make better decisions than oligarchies.” Dolan also noted that the tax cuts “made the victory in the Cold War possible” and led to the death of “what Reagan called ‘the cult of the state’”—showing the world the all-encompassing benefits of economic freedom and reduced federal power.

As Democrats continue to pursue colossal tax hikes and spending plans, Dolan predicts it will amount to “political suicide.”

“There’s nothing like the economic issue when it goes against you,” Dolan said. And for today’s Democrats, “it already has.”

“They have learned nothing,” he added. Even as inflation continues to skyrocket, wages continue to plummet, job growth continues to stall, everyday costs continue to rise, and economic confidence continues to dwindle, the Democrats as recently as this week took steps toward launching a pilot program for a mileage tax in their so-called “infrastructure” package.

If Dolan’s assessment proves correct, as history suggests it will, Democrats are setting themselves up for a blistering defeat come next year’s midterms and the looming 2024 presidential election. Until the Left can understand the timeless wisdom of the Reagan economic approach and grasp the elemental truth that the people—not the government—are entitled to the fruits of their labor and are best equipped to make their own decisions, they will likely suffer at the ballot box.

On this 40^th anniversary of the landmark Reagan tax cuts, every American should hope that President Reagan’s groundbreaking legacy of freedom continues for decades to come.