Republican politicians favor lowering the federal tax burden on American households and businesses as much as possible. There’s little doubt on this point, given the party’s track record of pushing tax cuts when the opportunity arises (see 2001, 2003, and 2017, for the most recent examples). But the GOP commitment, implied and explicit at the same time, to never, ever support a net tax increase, under any circumstance, is making sensible lawmaking far more difficult than it should be. It’s time to break free of this counterproductive constraint.
President Ronald Reagan solidified the orientation of the Republican party toward lower taxes with his 1980 campaign, 1981 tax cut, and landslide reelection in 1984. He followed that up with a tax reform in 1986 that lowered the top marginal rate on individuals to 28 percent — a level that had been exceeded for many decades preceding 1986, and which was breached a few short years later by tax hikes enacted in 1990 and 1993.
While no one would question Reagan’s tax cutting credentials, he signed legislation raising taxes, on a net basis, numerous times during his two terms.
In 1982, as the federal deficit swelled beyond what the administration had projected, he reluctantly agreed to approve a bipartisan bill that partially rolled back his 1981 tax cuts based on a Democratic commitment to support spending cuts in subsequent legislation. The promised cuts proved elusive in follow-on budget negotiations, and Reagan called his acquiescence to a tax hike before having the savings from restrained expenditures in hand one of his biggest mistakes. But even if Congress had produced the cuts, Reagan still would have broken a rule in today’s Republican catechism.
A year later, in 1983, Reagan again agreed to a large, long-term tax increase as part of the bipartisan deal to prevent immediate insolvency for Social Security and ensure positive balances in the program’s trust funds for many years. Reagan’s Social Security deal is a clear example of why a firm “no tax hike” pledge is problematic. That bill raised the retirement age from 65 to 67 and delayed a cost-of-living payment for program beneficiaries. These provisions alone produced long-term savings equal to 1.0 percentage point of Social Security’s tax base, which in present value terms would exceed $5 trillion over the next 75 years. It’s one of the largest long-term spending cuts ever approved by Congress, and it hasn’t been, and won’t ever be, reversed. And yet today’s Republicans say they couldn’t even consider approving this deal if it were presented to them today because it would violate their promise to never raise taxes.
The no tax hike position got its start in the 1986 tax reform effort. Several business and policy advocacy organizations began asking members of the House and Senate, as well as candidates for seats in those chambers, to sign a pledge opposing a net increase in income tax rates. While the wording of the federal pledge is narrower in scope than is widely assumed, it is now broadly interpreted to mean signers agree not to support net tax hikes in federal legislation. Thus, a bill that includes provisions raising revenue also has to include tax reductions of equal or greater amounts.
The pledge became politically salient in 1992, when then President George H.W. Bush lost his bid for reelection. His loss is widely assumed to have been caused, at least in part, by his acceptance of a large tax hike in the 1990 bipartisan budget deal after having pledged never to increase taxes in his 1988 speech at the GOP convention.
While there is little question that violating his 1988 campaign promise hurt Bush in 1992, his mistake was to draw such a hard line in the first place. Voters knew Reagan wanted lower taxes, and yet he never swore off deal-making that might require new revenue. When he cut deals with Democrats that included tax hikes in return for provisions he favored, voters didn’t blame him for breaking a promise. Bush’s problem was that he made a very public commitment to voters and then broke it two years later.
Since 1990, it has been routine for nearly all Republican candidates to sign the pledge. President George W. Bush did so while running in 1999, as did Mitt Romney in 2008 and 2012 (a notable non-signer is President Trump).
Retaining the GOP’s absolutist position on taxes might be defensible if the party were advancing an agenda that demonstrated it could govern responsibly without new revenue. Unfortunately, Republicans have proved beyond all doubt that they have no such agenda. In fact, the party has gladly gone along with successive bipartisan deals that increased federal spending by hundreds of billions over ten years. Together with the 2017 tax cut, President Trump has presided over one of the most fiscally reckless periods in American history.
Neither party is strong enough to take on the nation’s long-term fiscal challenge on its own. This is widely understood in Congress, including among Republicans. Party leaders regularly deflect comments about pursuing entitlement reform by saying it will require support from Democrats to get off the ground. And yet these same leaders insist they won’t agree to any tax hikes even in exchange for Democratic concessions on entitlement spending.
The no net tax hikes position also runs contrary to the nation’s constitutional order. Congress is an institution built to foster negotiation and compromise. It’s where the countries many factions are supposed to hash out their differences. Indeed, it is expected that members of the House and Senate will engage vigorously in the give-and-take that makes it possible to pass laws in a functioning democracy. It is healthy that, during elections, the parties present clear choices to the voters, with the Democrats favoring more spending and taxation, and Republicans less. But, at some point, both sides have to find creative ways to pass laws that address the country’s many festering challenges.
Republicans should return to the posture President Reagan took while in office. He made it absolutely clear that he wanted lower taxes, and lower federal spending too. He pushed hard for spending cuts (unlike most Republicans today). But with Democrats running the House, he knew nothing would get done if he drew lines that made all deal-making impossible.
Voters know Republicans want lower taxes. It is an important part of the party’s brand. But these same voters also are beyond frustrated that so little is getting done in Congress. It’s time for GOP to drop a pledge that is contributing to the dysfunction.
James C. Capretta is a RealClearPolicy Contributor and a resident fellow at the American Enterprise Institute.
