What has hap­pened since then?

The Week (US) - - News 11 -

Pres­i­dent Ge­orge W. Bush pushed through a ma­jor tax cut in 2001, but Rea­gan’s tax bill re­mains the last true over­haul of the tax code. Since then, Demo­cratic pres­i­dents have raised the top tax rate to 39.6 per­cent, while un­der both Repub­li­can and Demo­cratic ad­min­is­tra­tions the num­ber of tax brack­ets has ex­panded to seven and a cor­nu­copia of new tax breaks and loop­holes has been added. The par­ti­san de­bate over whether cut­ting taxes fu­els growth rages on, though most econ­o­mists say that the econ­omy is af­fected by so many fac­tors that the im­pact of low­er­ing rates is murky at best. The econ­omy boomed after Rea­gan’s first round of tax cuts in 1981, but was also helped by a big drop in in­fla­tion and in­ter­est rates and in­creased mil­i­tary spend­ing. The 1986 tax bill was fol­lowed by a recession in 1990. Taxes went up un­der the Clin­ton ad­min­is­tra­tion, but the econ­omy grew even faster than it did un­der Rea­gan, buoyed by the in­ter­net boom. A Con­gres­sional Re­search Ser­vice pa­per in 2012 found “no cor­re­la­tion be­tween top tax rates and eco­nomic growth.” Bruce Bartlett, a for­mer ad­viser to Pres­i­dent Rea­gan who worked on the 1986 tax bill, ar­gues that true re­form should be de­signed to make the sys­tem sim­pler and fairer, not to put more money in wealthy peo­ple’s pock­ets. “In re­al­ity,” he says, “there’s no ev­i­dence that a tax cut now would spur growth.”

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