George Bush Sr. on Tax Reform President of the U.S., 1989-1993; Former Republican Rep. (TX)

Voodoo economics: 30% tax rate cut causes 30% inflation

Bush jeered at Reagan that "you cite the Kennedy tax cut. There wasn't any surplus then--there was a deficit resulting from that scheme." He said that "it is my understanding that the Kennedy tax cut resulted in a $4.4 billion deficit. And it is my perception that tax cut applied today in the same percentages would result in an inflation rate of about 30% to 32%."

1989: Prioritized cutting capital gains tax

Others have pushed him to cut payroll taxes on a one-time basis, a move that would have helped middle- and lower-class workers the most because Social Security and Medicare taxes make up a proportionately larger share of their tax burden than it does for wealthier taxpayers.

Cut capital gains tax on those earning over $200K per year

Reneging on his campaign promise to Americans, the President agreed to a tax increase in 1990 as part of the $492 billion deficit reduction package passed by Congress. He felt compelled to compromise because of the rapidly escalating costs of salvaging the savings-and-loan industry. In exchange for agreeing to a tax increase, Bush insisted on cutting the capital-gains tax to benefit those who earned more than $200,000 a year.

He admitted later that it was the "biggest mistake" of his presidency. Democrats applauded him: "He laid the economic foundation for the prosperity that Bill Clinton took credit for in the 1990's."

"You are going to get killed [in the midterm elections]," said the head of the National Republican Congressional Committee. "This is the most sacred pledge Bush ever made."

Abandoned “Read my lips: No new taxes” pledge

Demanded capital gains tax reduction; yielded to Congress

"Read My Lips" did not promise to cut taxes

The contentious young Turks in the House were focusing on domestic policy and social issues. They wanted a capital gains tax cut, enterprise zones for cities, and tax fairness for families. Bush may have promised not to raise taxes, but he had not promised to cut them.

In White House Daze, Charles Kolb was rougher. He spoke for most Conservatives when he wrote: "With this one assertion [violating the no-tax pledge], Bush squandered not only his capital but also his credibility. Democrats now knew for a certainty that he would compromise with them on even his most fundamental 'beliefs.'" It was a blow to the middle class, many of them Reagan Democrats that would doom the Bush presidency. Public cynicism would skyrocket and voter participation would decline.

OpEd: 1990 taxes caused right wing to rise up against Bush

Better to enact tax increase than to have recession

"Clearly, each and every one of us can find fault with something in this agreement. In fact, that is a burden that any truly fair solution must carry. Any workable solution must be judged as a whole, not piece by piece. Those who dislike one part or another may pick our agreement apart. But if they do, believe me, the political reality is, no one can put a better one back together again. Everyone will bear a small burden. But if we succeed, every American will have a large burden lifted. If we fail to enact this agreement, our economy will falter, markets may tumble, and recession will follow."
(Address to the nation on the federal budget agreement.)