April 15, 2019
IN HIS WORDS
“Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." - Ronald Reagan
Ronald Reagan’s view of the government was straightforward: Government wasn’t the solution, it was the problem. One of the most obvious examples of the flaws in U.S. government, the president believed, was the tax system — which is why he set his sights on righting how Americans were taxed even before he took office. The work of President Reagan on tax cutting is among the cornerstones of his legacy — and continues to serve as an example of what our country should be striving for today.
Reagan’s beliefs about the lopsided nature of American taxes are perhaps best encapsulated in this famous quote of his: “Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." To remedy the obvious problems with that system, Reagan instituted a multipronged approach that involved a reduction in government spending, deregulation and tax cuts.
When it comes to President Reagan on tax cutting, he approached the issue as aggressively as he did all other economic plans — a commitment that was imperative, given the recession and mounting inflation. In 1981, he cut the individual top tax rate from 70 percent to 50 percent, and five years later, again slashed it to 28 percent. During his presidency, the corporate tax rate also fell from 48 percent to 34 percent.
The policies of Reagan on tax cutting were informed by his view that such cuts would promote economic expansion, leading to a stronger economy and ultimately a broader tax base. Reagan’s plan helped advance significant increases in the gross domestic product, fueling economic growth and a reduction in unemployment. Couple with the other strategies of Reagan’s economic approach — dubbed Reaganomics — the tax cuts were a significant step for a country that had been lagging financially to finally find its footing and surge forward.
The flaws in the American tax system continue to be hotly debated today, more than 35 years after Reagan’s first round of tax cuts. The success his administration realized from its economic policies should shine as a beacon for today’s leaders to fuel forward financial momentum.
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