Ronald Reagan, tax hiker

APRIL 15, 2010

It’s Tax Day, so I decided to dedicate this space to celebrate California’s greatest tax and spend governor. The one who, more than any of the other 38 men who’ve run the state, hit residents with bigger taxes and grew government more than any other.

Yes, I’m talking about Ronald Reagan.

In terms of real dollars, Gov. Arnold Schwarzenegger’s $12.5 billion hike in early 2009 was the biggest, sure, but in terms of percentage of general fund, none beats Reagan’s, as Los Angeles Times columnist George Skelton pointed out back in July. “[T]he all-time champ is Reagan,” he wrote. “His tax increase equaled roughly 30 percent of the general fund. [Pete] Wilson’s was 16 percent; Schwarzenegger’s 14 percent.”

This, from a guy who ran on a platform in 1966 of “squeeze, cut and trim.” And Reagan was no slouch on spending, either – as Skelton pointed out in an Oct. 29, 2009 LA Times column, the general fund’s average annual growth was 13.6 percent. His nearest rival, Jerry Brown, grew the general fund at only 12.7 percent a year. Pat Brown was slightly lower at 11.7 percent. By comparison, Schwarzenegger has been a slouch, growing the general fund an average of just 1.3 percent each year he’s been in office.

Don’t feel bad if this surprises you. Reagan surprised a lot of people in the mid-1960s. Pat Brown actually wanted to run against him – he figured Reagan was a pushover extremist and would, like Barry Goldwater in 1964, crash and burn. But Reagan tapped into growing fears over urban riots and new federal open housing requirements that came along with the Civil Rights Act and ended up beating Brown by nearly a million votes.

Governor Reagan raised taxes a few times, according to Jackson K. Putnam’s March 22, 2006 article in California History magazine. The first came in 1967, barely a week into his governorship. “He agreed to a $1 billion tax increase ($5.5 billion in today’s dollars) that was at the time a record for any state,” biographer Lou Cannon wrote in 2006.

Reagan campaigned in 1966 on cutting government, but his first budget exceeded Pat Brown’s by half a billion dollars. “Taxes should hurt,” Reagan said, and they certainly did – especially for the middle class. The billion dollar tax increase to pay for that big increase in government spending was sweeping: the sales tax jumped from three cents to five; bank, corporation and inheritance taxes went up half a percentage point to six percent; liquor taxes rose from $1.50 a gallon to $2; cigarette taxes leaped from three cents a pack to 10; and the maximum income tax rose from seven to 10 percent.

Then in 1968, Reagan – at first – embraced the recommendations of his “Tax Reform Task Force,” which included taxing food, utility bills and even haircuts. When Democrats and the general public began howling in protest, Reagan backed off, only to endorse another plan to shift the income tax burden down to lower income people. Assembly Speaker Jesse Unruh – then the state’s most powerful Democrat and Reagan’s greatest rival – mercifully let the proposal die in the Revenue and Taxation Committee. That same year, Reagan even worked with Unruh to undercut Prop 9, a kind of pre-Prop 13 that, according to Putnam, would have frozen “all property tax assessments at one percent of actual value.”

Reagan hiked taxes again in 1971, this time on banks and corporations. The next year, Reagan won support for a comprehensive tax bill by helping defeat another ballot measure aimed at freezing property taxes.

All in all, it was a pretty progressive record. In fact, political scientists Gary Hamilton and Nicole Bigart wrote that Reagan’s greatest legacy as governor was legitimizing state government, even to the point of making it run more efficiently.

“A final ironic consequence of the structured Reagan administration was that it worked well to systematize government,” they wrote in their 1984 book Governor Reagan, Governor Brown: A Sociology of Executive Power. [G]overnment entrenched itself in many ways as a strong effective force in California society.”

-Anthony Pignataro

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