40th Anniversary of Reagan’s Tax Reform Act

“But for all the reform’s economic benefits, I believe that history will record this moment as something more: as the return to first principles. This country was founded on faith in the individual, not groups or classes, but faith in the resources and bounty of each and every separate human soul.”

-President Ronald Reagan, before signing the Tax Reform Act of 1986

October 22 marks the fortieth anniversary of the Tax Reform Act of 1986. And President Reagan’s comments about how the legislation would be remembered were largely correct.  The legislation left more money in Americans’ pockets, strengthened free-market forces and supported economic growth. But perhaps more importantly, this legislation showed the nation that such reforms could succeed in the United States.

These policies don’t just strengthen our economy and improve competitiveness; they support our ideas of who we are and what our relationship is with the government. After the passage of the 1986 legislation, the tax code was doing less to pick winners and losers. It wasn’t gouging some and rewarding others; it treated Americans as free people, whose work had dignity according to the founding ideas of our nation/

The 1986 law was a far cry from the flat tax that Steve Forbes would espouse about 20 years later, but it was a successful application of the same ideas. The states have taken these policy ideas even further. Less than a year after the 1986 legislation, the Colorado General Assembly made their state the first to switch from a progressive to a flat personal income tax. Thus, in 1987, the march of higher rates and progressive income taxes across the country no longer seemed inevitable.

At ALEC, we have written and spoken countless times about the state flat tax revolution, which began in Colorado, but all of that may never have happened but for the Tax Reform Act of 1986.