The once and future bipartisan coalition for tax reform

The Tax Reform Act of 1986 looks to many like a beautiful fluke.  That is, tax reform was a “harmonic convergence” of bipartisanship that happened once, bringing with it two full decades of steady economic growth

Yet perhaps we should be more optimistic.   After all, tax reform—defined as lowering the rates and broadening the base—was no mirage: It really happened, not only in the ‘80s, but also in the ‘60s, and with the enthusiastic support of both parties.  

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We need to recollect the ideas that brought the two parties into agreement.  It wasn't that the two parties saw eye-to-eye—not at all. 

So what were these two visions?  In a nutshell, Republicans saw tax-rate reductions as a boon to the private economy.  

By contrast, Democrats saw tax-rate reductions as a boon to the public economy.  Their main goal was for the government to have more money to spend.  

The champion of this sort of thinking was John F. Kennedy.  In 1960, Kennedy had campaigned for the White House on a pledge to “Get the country moving again.” 

JFK’s vision was primarily a pubic vision: He wanted the government to have more money to do more things.  

So on December 14, 1962, when he said, in a speech to the New York Economic Club, “It is a paradoxical truth that tax rates are too high today and tax revenues are too low,” he meant exactly what he said—rates too high, revenues too low.   He embraced the “paradox,” as he called it, that  a lowering of tax rates would yield higher tax revenue

Yes, in Kennedy’s mind, the government needed more money. 

We might consider what is probably his best-known quote about the economy: “A rising tide lifts all boats.”  We can note that those words were said in a speech delivered in late 1963, as he lobbied once more for the tax-rate reduction.   Yet because JFK’s words about a “rising tide” were uttered during his tax-cut campaign, it is often assumed that this rising tide had something to do with tax cuts.  Kennedy was referring, specifically, not to the positive impact of tax cuts, but to the positive impact of spending increasesyet gained, to be sure, by those very same cuts.    

On October 3, 1963, JFK traveled to Heber Springs, Arkansas, to dedicate the Greers Ferry Dam.  In his remarks that day, he was at pains to delineate the public benefits of public-works projects: “A rising tide lifts all the boats, and as Arkansas becomes more prosperous so does the United States.”

And that was Kennedy’s bold idea.    He himself was fully aware of the stimulatory effect of tax cuts, but what he wanted to sell, especially to his fellow Democrats, was the benefit of that stimulus—higher tax revenues that could be spent on public works, such as the Greers Ferry dam.     

One Republican who agreed with Kennedy was another JFK: Jack F. Kemp.   In the ‘70s and ‘80s, it was easy for Kemp, a “supply side” Republican, to say that the purpose of tax-rate reductions was to give more to workers, savers, and investors.    That was the Republican message.   And yet at the same time, Kemp could say, echoing JFK, that the goal was also to generate more tax revenue for social programs.    That was a message that spoke to Democrats and made Kemp such an important “crossover figure” and bipartisan bridge-builder.   

Tax-rate reductions, as Kennedy and Kemp foresaw in their different eras, would so stimulate the economy that revenues would increase as well.  And that was good news for Democrats and Republicans,

During the Reagan years, everything came together—for both parties. Federal revenues soared, from $617 billion in fiscal 1982 to $991 billion in fiscal 1989, and yes, this revenue-surge happened even as the top personal tax rate was cut from 70 percent to 28 percent and the corporate tax rate from 46 percent to 34 percent.  

Perhaps the Kennedy-Kemp dream, which glowed so brightly from the 60s to the 80s, has dimmed, even died.    But if we can remember the policy arguments that once swayed our leaders, perhaps we can again recapture the policy positions, in which both parties believe that they have something to gain.   

Indeed, as economic growth is once again slowing down, it seems all the more vital that we recapture the cooperative spirit that animated both John F. Kennedy and Jack F. Kemp.  

Pinkerton is an author and political analyst. He served on the White House staff under presidents Ronald Reagan and George H.W. Bush and on each of their presidential campaigns from 1980 to 1992. In January 2008, he became a senior adviser to the Huckabee 2008 presidential campaign.

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