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Reagan: in 1984 I lowered the top income tax rate from 70% to 28%. Then I taxed social security for the first time ever to make up for it

I saw this image on social media. There a few claims here that I'm curious about the accuracy of. Of course, the President can't unilaterally alter tax laws, but regardless, did these things happen?

  • Was the top income tax rate lowered from 70% to 28% in 1984?
  • Near that time, did Social Security begin being taxed?
    • Was this the first time it was taxed?
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  • Deleted pseudo-answer comments. This conversation has been moved to chat.
    – Oddthinking
    Nov 20 '21 at 21:35
  • Comments on this question generated a meta discussion. Please post your thoughts there, not here.
    – fredsbend
    Nov 21 '21 at 20:16
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Just a few additional references and context, to add to Joe W's answer:

  • The 1981 tax cuts were enacted by the Economic Recovery Tax Act of 1981, Public Law 97-34, signed into law by Reagan on August 13, 1981. The new income tax rates, including the new 50% top rate, are in Section 101 on page 176 of the volume. The previous 70% top rate had been enacted by the Revenue Act of 1964, Public Law 88-272, Section 111 (which in turn reduced it from the previous rate of 91%). The nonprofit Tax Foundation has a history of income tax rates, with references to the corresponding laws.

  • The 1986 tax cuts were enacted by the Tax Reform Act of 1986, Public Law 99-514, signed into law by Reagan on October 22, 1986. The new rates, including the new 28% top rate, are in Section 101 on page 2096. These rates became effective for tax year 1988, after a phase-in period in 1987 (see page 2098).

    Wikipedia for some reason says that "Beginning with tax year 1988, the Act provided a nominal rate structure of 15%/28%/33%. However, beginning with 1988, taxpayers having taxable income higher than a certain level were taxed at an effective rate of about 28%." I can't figure out where they got the 33% figure and have tagged that claim as Citation Needed.

  • The taxation of Social Security benefits was initiated in the Social Security Amendments of 1983, Public Law 98-21, signed into law by Reagan on April 20, 1983. See Section 121 on page 80, stating that 50% of benefits shall be included in taxable income (which remains the rule to this day). Prior to that, benefits had been non-taxable under Treasury Department rulings from 1938 and 1941 [SSA Historian's Office Research Note #12, "Taxation of Social Security Benefits], so the benefits apparently were taxed "for the first time ever" (unless there was a short window between 1935 and 1938).

  • Regarding Reagan's personal responsibility for these policies (as implied in the image by the use of "I" with Reagan's photo): obviously he was not solely responsible, as the bills had to be passed by Congress first. He did sign all three bills into law (as opposed to vetoing them).

    You may decide for yourself to what extent this places the credit/blame on Reagan himself, and to what extent that responsibility is shared by Congress, or particular parties or legislators. You may (or may not) consider it relevant that all three bills passed Congress by large bipartisan majorities. (Actual vote counts are a little awkward to compile because there were often several votes, e.g. on an original version and later on a version reconciled between the House and Senate.) In most or all cases, those majorities would have been sufficient to override a veto, if all legislators who originally voted in favor of the bill had voted to override (which they might or might not have done if it came to that). It is also worth noting that Democrats controlled the House of Representatives, by a wide margin, throughout Reagan's presidency.

  • Regarding whether the taxation of Social Security benefits was "to make up for" the other tax cuts: It's hard to separate out the financial impacts of those specific provisions, but the Treasury Department published an analysis of the overall effects of major tax bills ["Revenue Effects of Major Tax Bills", OTA Working Paper 81, September 2006]. Looking at the impact four years after enactment (to remove the effects of phase-ins):

    • Economic Recovery Tax Act of 1981: decreased revenue by $176.7 billion

    • Tax Reform Act of 1986: decreased revenue by $9 billion

    • Social Security Amendments of 1983: increased revenue by $11.4 billion

    By those numbers, the 1983 Social Security tax increase came nowhere close to making up for the revenue loss due to the 1981 and 1986 tax cuts.

  • To summarize the image's timeline inaccuracies: none of the policies mentioned were enacted in 1984, though Social Security taxation would have come into effect for the 1984 tax year, I believe. The reduction of the top rate from 70% to 28% was in two steps, one of which came before the Social Security changes, and the other after; so it isn't correct to say "then I taxed Social Security..."

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  • Something to remember, just because congress has enough votes to override a veto doesn't mean they will if a veto happens. If all of this had wide bipartisan support I think it is safe to assume Regan supported them as well.
    – Joe W
    Nov 21 '21 at 15:20
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    @JoeW: Yes, of course that is speculative. Still, until 1987 the two houses of Congress were under opposite party control, so any bill reaching Reagan's desk necessarily had bipartisan support, and yet he still vetoed quite a few - some of which were then overridden by overwhelming bipartisan majorities. senate.gov/legislative/vetoes/ReaganR.htm Nov 21 '21 at 16:09
  • I am not sure what your point is here. The fact remains that you said he did use the veto and did not in this case which would lead one to believe that he supported it. If he didn't support it he would have used the veto and forced congress to override it.
    – Joe W
    Nov 21 '21 at 17:55
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    @JoeW: Well, politics is complicated. He could have opposed the bill, but signed it anyway because he knew it would inevitably pass and that forcing an override would cost him political capital in Congress. "Support" is a fuzzy concept so I just wanted to lay out what he actually did, what his other options were, and what might have been their effect. Nov 21 '21 at 18:01
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    @JoeW: I don't have any idea how he felt about the bill. I don't make any claims about it one way or the other, and I do not think it would be relevant to the question anyway. My answer doesn't contain the words "support" or "oppose". I am trying to provide information to help people evaluate to what extent he was responsible for the policies, and how far that responsibility was shared by other branches of government or political parties. Nov 21 '21 at 18:16
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No, this is not true the top tax bracket went from 70% to 50% for tax year 1981, 50% to 38.5% for tax year 1986 and 38.5% to 28% in tax year 1987.

While it is true that these things did happen during his presidency he was not the one responsible for them. All tax bills (which all of this was) start in the house of representatives, are approved by both chambers before being signed by the president. So while he might have signed the he required the help of congress for it to happen. When it comes to tax laws there is no one single person to blame.

Tax Laws

All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.

Tax Year/Top Bracket
1980/70%
1981/50%
1986/38.5%
1987/28%
1991/31%

Social security did however start getting taxed in 1984.

Since 1984, Social Security beneficiaries with total income exceeding certain thresholds have been required to claim part of their Social Security benefits as taxable income. The income thresholds for taxation of benefits have remained unchanged since Congress first established them but, because wages have increased, the proportion of Social Security beneficiaries who must pay federal income tax on their benefits has risen over time. In 1984, less than 10 percent of beneficiaries paid federal income tax on their benefits. A Social Security Administration (SSA) microsimulation model, Modeling Income in the Near Term (MINT), projects that 52 percent of families receiving Social Security benefits will pay income tax on their benefits in 2015. Most of these families will be in the upper half of the total-income distribution.

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    So the fussy details are not quite correct, but the basic facts are true?? Nov 20 '21 at 23:00
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    @DanielRHicks Well he did lower taxes over a course of 7 years and social security was taxed during that time frame but that doesn't line up with the claim. It also makes be want to question the claim that the two where related considering that taxes went up again after he left office. I think there is a reason to be picky with the details of these types of claims
    – Joe W
    Nov 20 '21 at 23:18
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    I agree with @DanielRHicks that the fussy details are incorrect, but that the basic facts are true: The Reagan administration championed the income tax reductions with regard to rates,, and the Reagan administration fell in line with almost everyone regarding modifications to Social Security benefits. Social Security was on the verge of going bankrupt in less than a year. Everyone sane was onboard with the Social Security Ammendments of 1983. Nov 21 '21 at 12:45
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    @DavidHammen The devil is in the details, the claim isn't just that taxes got lowered and social security got taxed but this happened in 1984. If someone is making a claim and can't get a basic fact like when it happened correct I would question their motivations.
    – Joe W
    Nov 21 '21 at 15:14
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    @JoeW Their motivation was to fit the narrative into a single meme image. Nov 22 '21 at 8:33

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