By Anna Ravenwoode ?letters to the editor
It was April 8, 1987. I slid into the comfortable chair in the modest office of my tax accountant. At this time, I was unaware of the 1986 Tax Reform Act. So, on that day I learned many of the deductions I had previously been able to claim on my teacher”s salary ? were gone.
I was puzzled. Why would the federal government take basic deductions away from people who were, at that time, considered “middle class?” It is a question that got me involved in how tax policy can shape a nation”s economic future. I started reading about presidential tax policies, starting with Franklin D. Roosevelt through George W. Bush. Of the 12 presidents who served in that time span, FDR and Ronald Reagan stood out. Why? They aggressively used tax policy to reform our economic system.
In addition, my research showed patterns in the policies of all 12 presidents: Each “reacted” to the economic conditions left by his predecessor; all accepted “capitalism” as our economic system; many theorized on how “tax policies” effect the circulation of money in our economy.
We all know that the biggest reformer of the 20th century was Franklin D. Roosevelt, through his New Deal. Generally speaking, the New Deal represented bigger government involvement in our economy through stimulus spending to create infrastructure (public works) projects; and more regulation of commerce (Wall Street) due to the Great Depression.
But, by the 1980”s, the New Deal needed to be reviewed. So, President Reagan became the next major reformer. The 1986 Tax Reform Act represented the push for smaller government and created a shift from government regulation of businesses ? to de-regulation. In short, the “trickle down theory” became the predominant tax policy. This policy increased taxes to poor and middle income families by eliminating deductions, thereby increasing taxable income. This tax increase (called tax reform) was needed to offset the tax cuts given to big businesses and corporations. The tax cuts to large corporations were awarded to provide more disposable income and encourage business expansion, which in turn would create more jobs. More jobs would create a larger middle class from which government could rely on for a tax revenue base. In addition, more employed people would stimulate the economy because working people ? spend more money. In short, “trickle down economics” was implemented to benefit commerce, government and the people. Reaganomics, as it was called, was continued by Presidents George H. Bush, Bill Clinton and George W. Bush. But, by 2008, the state of our economy required that Reaganomics be reviewed.
I believe that Ronald Reagan was well intentioned when he implemented “trickle down economics.” I believe that job creation through tax policy is the most stable form of economic stimulus. So why is our stock exchange struggling and our economy, as recently described by Warren Buffett, “falling off a cliff.”
The New Deal worked for 50 years ?. then, in light of a changing world, had to be reviewed in the 1980s. Reaganomics worked for 25 years and now in light of a “rapidly” changing world, is being reviewed ? as it should be. If it doesn”t work, fix it.
We need the “trickle up” stimulus tax reform President Obama is providing. Why? If our capitalist economy, which is busy “falling off a cliff,” cannot stimulate American commerce, the only other entity with the authority and money, is our federal government. The final option of “economic collapse”? is not an option.
And, 20 years from now, when President Obama”s tax policies need to be reviewed the American public will make sure it happens. The cycle continues ? as it should.
Anna Ravenwoode
Kelseyville
