Eric Cantor, "60 Minutes," and Taxes

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Nothing happening right now in Iowa is as important or as revealing (not to mention as entertaining) as the outburst by Eric Cantor's press secretary during a 60 Minutes interview that aired on Jan. 1. You won't find it on Politico's home page (yet), but it really happened. Scroll to the bottom of this item to watch the relevant portion (assuming you have the patience to sit through a commercial first). Here's the transcript:

Leslie Stahl: So are you ready to compromise?

Cantor: So I have always been ready to cooperate. I mean, if you go back to the first--

Stahl: What's the difference between "compromise" and "cooperate?"

Cantor: Well, I would say cooperate is let's look to where we can move things forward where we agree. Comprising principles, you don't want to ask anybody to do that. That's who they are as their core being.

Stahl: But you know, your idol, as I've read anyway, was Ronald Reagan. And he compromised.

Cantor: He never compromised his principles.

Stahl: Well, he raised taxes and it was one of his principles not to raise taxes.

Cantor: Well, he-- he also cut taxes.

Stahl: But he did compromise--

Cantor: Well I --

Press Secretary (offscreen): That just isn't true. And I don't want to let that stand.

Stahl: And at that point, Cantor's press secretary interrupted, yelling from off camera that what I was saying wasn't true.

[Reagan: My fellow Americans...]

Stahl: There seemed to be some difficulty accepting the fact that even though Ronald Reagan cut taxes, he also pushed through several tax increases, including one in 1982 during a recession.

[Reagan: Make no mistake about it, this whole package is a compromise.]

Cantor: We as Republicans are not going to support tax increases.

Cantor intended to use the interview to warm up his image as a fanatical creep. He let 60 Minutes into his home; he showed America that his mother-in-law lives with his family, just like President Obama's does; he let his wife say she is pro-choice; he talked about being a Jew raised in an overwhelmingly Christian environment. He wore a blue crew-neck sweater. (Putting on a sweater is what politicians do when they want to come across as warm and fuzzy.) The press secretary's interruption spoiled everything.

The Reagan record on taxes inhabits the realm not of opinion, where Cantor feels most comfortable, but of verifiable fact. The Gipper cut taxes in 1981, dropping the top marginal rate from 70 percent to 50 percent and eventually to 28 percent. But Reagan also raised taxes many times, most notably in 1982, in what has often been described as the largest peacetime tax hike in history. You sometimes hear conservatives say that the 1982 tax hike is mischaracterized because it mostly cancelled projected tax cuts. That's preposterous. If taxes are scheduled to fall and you cause them not to, that's a tax increase. (By a similar logic, if taxes are scheduled to increase and you cause them not to--as congressional Republicans hope to do by extending the Bush income-tax cuts past their 2013 expiration date--then that's a tax cut, even though Cantor refuses to score it that way in defect negotiations.) And anyway, as the Reagan-era White House and Treasury official Bruce Bartlett has pointed out, Reagan increased taxes ten more times before he left office. By Bartlett's calculations, Reagan's combined tax increases amounted to $132.7 billion. It wasn't nearly enough to undo Reagan's combined $275.1 billion in tax cuts--the Gipper's tax record nets out to $142.4 billion in tax cuts--or Reagan's inability to cut spending in any meaningful way. That's why Reagan's chief domestic legacy is out-of-control deficit spending. Indeed, when Grover Norquist launched his project to name anything and everything after Ronald Reagan I humbly proposed that the deficit be re-christened "the Reagan."

If current GOP doctrine were, "It's OK to raise taxes if over the course of two presidential terms the net result is a tax cut" then perhaps it might be deemed unfair to dwell on Reagan's tax increases. But of course that isn't GOP doctrine. GOP doctrine says "It's never okay to raise taxes, ever." Except of course if the tax increase is a payroll tax that the rich don't especially care about because it's capped for Social Security at $106,800 (chump change to any "job creator" worthy of the name). Though by the logic of the previous paragraph I suppose it is more properly described as a reluctance (except under extreme duress) to support the president's proposed tax cut.

What people remember about Reagan was that he lowered marginal income tax rates, which is to say he lowered, rather dramatically, the percentage you paid in taxes on income above a certain threshold. What ultimately matters, however, is the percentage of your total income that you end up handing over to the IRS, which is called the "effective tax rate." And under Reagan, the change in the effective income tax rate wasn't all that great. It averaged out to 12 percent the year he took office and fell to 10.4 percent the year he left office. Even for the now-famous top 1 percent, it fell only from 22.3 percent to 20.7 percent. For the stinking-rich top 0.01 percent (today that's everyone making $9.1 million or more) the net change in the effective income-tax rate was zero. It was 21.5 percent during Reagan's first and last years in office. (In between it bounced up and down, but never below 18.6 percent.)

The Reagan years really were a bonanza for the rich; you didn't imagine that. But that was because the overall effective federal tax rate on the one-percenters--i.e., not just the effective federal income-tax rate--fell from 34.6 percent to 29.7 percent. That's largely because of changes to the effective corporate income tax rate, which for the one-percenters fell from 10.8 percent to 7.3 percent. For the stinking-rich top 0.01 percent the effective overall effective federal tax rate fell from 39.1 percent to 32.2 percent and the effective corporate income tax rate fell from 17.5 percent to 10.3 percent. Reagan budget chief David Stockman famously called the 1981 tax bill a "Trojan horse" whose principal purpose was to lower income-tax rates for the rich. But in retrospect it looks more like a diversion to keep everyone from noticing that a drop in the corporate income tax rate was redistributing money upward to the rich. (Bill Clinton and George W. Bush subsequently achieved much the same by lowering the capital-gains tax.)

If Cantor's press secretary wanted to tell Leslie Stahl, "You're omitting the fact that Reagan cut federal taxes substantially for the stinking rich, chiefly through alterations to the corporate income tax that, thank God, got little attention at the time," that would be a fair point. But of course it's a point he would never make. And it still wouldn't make Stahl's point untrue or unfair.

The New Republic

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