Tax Debate: 1984 Election and Beyond

Report Outline
Campaign's Tax Issue
Proposals for Reform
Prospects for Change
Special Focus

Campaign's Tax Issue

Reagan vs. Mondale on Budget Deficits

Four years ago, candidate Ronald Reagan successfully based his presidential election bid on the promise to cut federal income taxes. The nation's economic ills, he proclaimed, were due to the excessive burden government imposed on its citizens through taxation and interference in private enterprise. Renewed growth and prosperity could be attained by reducing taxes and “getting the government off our backs.”

As president, Reagan has largely succeeded in transforming his vision into law. Congress has approved substantial cuts in individual and corporate income taxes, as well as federal spending for many domestic programs. But the administration's prediction that the federal budget deficit—$59.6 billion in 1980—would be wiped out before Reagan had completed his first term in office proved to be far off the mark. The increase in defense spending requested by the administration, together with an increase in federal payments to benefit programs—unemployment insurance, aid to families with dependent children, food stamps—occasioned by the deep recession of 1981–1982, boosted the budget deficit to record levels.

This election year, the focus of debate has shifted from tax relief to deficit reduction. And since there are few areas of the federal budget where further spending cuts can be made without drastically altering basic policy objectives, many observers say this goal can only be achieved by a reversal of the trend toward lower income taxes of the past four years.