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The 1990 Budget Deal: Real Tax Hikes, Fake Spending Promises


Posted by Ryan Ellis on Thursday, July 7th, 2011, 7:07 PM PERMALINK


In 1990, President George H.W. Bush was promised $2 in spending cuts for every $1 in tax hikes by Congressional Democrats.  That's not what happened.

All $137 billion in tax hikes went through.  Most notable was raising the top marginal tax rate from 28 percent (the Reagan low) to 31 percent (itself a setup for the 1993 Clinton tax hike of this rate all the way up to 39.6 percent).  There were also increases in "sin" taxes and the Medicare payroll tax, as well as the yacht "luxury tax" that President Obama seems so intent on re-visiting on the jet plane manufacturers.

Not only did the $274 billion in promised baseline spending cuts never materialize--baseline spending was actually $22 billion higher than what CBO projected it would be before the deal.  This despite another tax hike/baseline spending cut deal in 1993 (the Clinton tax hike) and the GOP takeover of Congress in 1995.

The lesson is simple--tax hikes are real in these deals, but the spending cut promises are a fraud, plain and simple.  Raising taxes for fake spending cuts is no deal at all.

Do you think that Republicans today should accept tax hikes in exchange for spending cut promises given what happened in 1990?

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