Thanks Quin. I don’t know if I gave Chait too much credit, but I do know that there were some points that couldn’t fit in my column. While Grover Norquist can certainly hold his own, I notice in their TNR debate Chait keeps bringing up Reagan’s “progressive tax reform.” He mentions that it closes loopholes and ends “favorable tax treatment” for capital gains, but doesn’t share many other details of that reform.
The Tax Reform Act of 1986 cut the top marginal income tax rate down to just 28 percent, the lowest since Herbert Hoover was president. The fourteen income tax brackets were reduced to two, with a lower 15 percent tax rate — the closest we have ever gotten to a flat tax. The additional progressivity was caused by balancing rate cuts with the elimination of loopholes and dropping some 3 million low-income workers from the tax rolls entirely, both approaches that conservatives would endorse today.
It is true that the tax rate on capital gains was higher after the ’86 tax reform. The final bill was drafted with the input of some fairly liberal Democrats. But the higher capital gains taxes came at a cost and didn’t produce much in the way of additional revenue. By 1992, all three major presidential candidates were promising to cut the capital gains tax, which Bill Clinton (and the Republican Congress) finally did in 1997.
Would conservatives back a similar tax plan today? I dunno. This proposal from a 2005 National Review piece by Ramesh Ponnuru has some similarities to the 1986 reforms and was, as I recall, fairly well received by other conservatives..
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