Michele Bachmann Proposes Tax Hikes for Everyone -- Reagan Style

Michele Bachmann Proposes Tax Hikes for Everyone -- Reagan Style On Thursday morning, presidential candidate Michele Bachmann may have inadvertently made one of the boldest moves of the 2012 GOP primary campaign. Speaking on Fox News, the Minnesota congresswoman stated that she wants to adopt Ronald Reagan's tax plan, a rate structure that is much higher than current tax rates.

Criticizing Herman Cain's catchy-sounding 9-9-9 tax plan, Bachmann offered her own economic proposal, which she emphasizes has "not only a tax plan in it, but has a jobs and economic recovery plan." After sending viewers to her website, she explained the inspiration for her proposal: "For my tax plan, I take a page out of one of my great economists that I admire, Ronald Reagan. And under my tax plan, I want to adopt the Reagan tax plan. It brought the economic miracle of the 1980s." A few moments later, she reiterated her point, emphasizing, "I want to re-institute the Reagan tax model from the 1980s."



Within hours, Talking Points Memo and other media outlets across the country were reporting her apparent break with the Republican mainstream on taxes. The Bachmann campaign has not replied to repeated requests for clarification.

It's not hard to understand why Bachmann repeatedly invoked the Gipper: Among contemporary Republicans, Reagan's massive 1981 tax cut is legendary. When he came into office, the top tax rate of 70% kicked in at $108,300 and the median household paid 34%. Within a year, he had dropped taxes sharply: The top rate -- which fell on people who made $41,500 or more -- was down to 50%, and the tax rate paid by median households had dropped to 31%. By the end of the Reagan presidency, the wealthiest taxpayers and median households were paying the same rate: 28%.

But while Reagan's tax initiatives have gained near-totemic power among conservatives, the truth is that most taxpayers now pay even less than they did in the eighties. A single payer making the median household income of $49,445 pays 25%, and a payer in the highest tax bracket -- which kicks in at $373,650 -- pays 35%. On the surface, Bachmann's proposal to revert to the Reagan-era tax code would translate into a 3% to 9% tax increase on median households, while the richest taxpayers would face a tax change ranging from a 7% drop to a 35% rise.

The Big Picture: Even The Rich Would Pay More

But the basic tax rate only tells half the story. While cutting income tax, Reagan also raised taxes by closing loopholes and ending many tax breaks; for that matter, he increased levies on many consumer products, including gasoline and cigarettes.
Sponsored Links
To get a more complete picture of the tax structure, both under Reagan and in our own time, it's helpful to look at the total effective tax rate, a measure of the complete tax levy on most taxpayers.

Through this lens, Bachmann's tax boosting proposal seems even more impressive. During the Reagan years, the total effective tax rate ranged from 29.2% to 30.7%. By comparison, today's rate is 27.7%. In other words, depending upon which year of Reagan's presidency one considers, Bachmann's proposal would raise taxes by between 1.5% and 3%, across the board.

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

The 10 Most Overlooked Tax Deductions

Don't overpay taxes by overlooking these tax deductions. See the 10 most common deductions taxpayers miss on their tax returns so you can keep more money in your pocket.

Read More

Brought to you by TurboTax.com

How to Find a Good CPA for Your Taxes

Finding a good CPA for your taxes is simple with these seven tips: 1. Ask about their specialization; 2. Verify their identification number, 3. Look up their license, 4. Consider their experience, 5. Confirm their willingness to sign, 6. Ask for advice, and 7. Determine their fees.

Read More

Brought to you by TurboTax.com

Reporting Self-Employment Business Income and Deductions

Self-employed taxpayers report their business income and expenses on Schedule C. TurboTax can help make the job easier.

Read More

Brought to you by TurboTax.com

2018 Tax Reform Impact: What You Should Know

Congress has passed the largest piece of tax reform legislation in more than three decades. The bill went into place on January 1, 2018, which means that it will affect the taxes of most taxpayers for the 2018 tax year.

Read More

Brought to you by TurboTax.com
Read Full Story
Your resource on tax filing
Tax season is here! Check out the Tax Center on AOL Finance for all the tips and tools you need to maximize your return.