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

In April 1980, Bush introduced a line that remains a slur against supply-side tax cuts to this day. Bush spoke of Reagan's "voodoo economic policy". The tax rate cut would cause a budget deficit--this was the traditional worry of old-fashioned Republicans--and the deficit would in turn cause inflation. There would be too much extra spending in the economy because of the tax cut and the budget deficits. Reagan's 30% tax rate cut would cause the inflation rate to go up in an identical manner: a 30% inflation. The accusation did not sound entirely wild, because through in 1980, inflation was running at an annual rate of 19%.

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%."

Source: JFK and the Reagan Revolution, by Lawrence Kudlow, p.207-8 , Sep 6, 2016

1989: Prioritized cutting capital gains tax

What George really cared about, and what became apparent when he himself moved into the Oval Office in 1989, was the tax on capital gains, or the amount stocks and bonds or other assets appreciate over the period that an investor owns them. Throughout his term, that was the priority--a tax cut that would have sent 60% of the benefit to the richest 1% of the population earning more than $200,000 a year. During the now-infamous budget-cutting, tax-raising deal of 1990, George was able to leave capital gains rates where they were while other taxes went up. And then, when the recession hit, George's ready answer was to push Congress into cutting capital gains taxes.

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.

Source: America's Next Bush, by S.V. Date, p.278 , Feb 15, 2007

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

George Bush betrayed the most famous words he ever uttered: "Read my lips. No new taxes." He knew at the time he made the promise that it was a lie.

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."

Source: The Family, by Kitty Kelley, p.493 , Sep 14, 2004

Abandoned “Read my lips: No new taxes” pledge

In June 1990 Bush abandoned his “Read my lips. No new taxes” campaign pledge and acknowledged that new or increased taxes were necessary. Many Republican conservatives were critical of this shift, and his popularity ratings fell immediately. A compromise deficit-reduction plan was killed by the House, with many Republicans in opposition. As a result, the government was almost forced to shut down for lack of money while a new budget proposal was drafted.
Source: Grolier Encyclopedia on-line, “The Presidency” , Dec 25, 2000

Demanded capital gains tax reduction; yielded to Congress

The president and Congress reached a compromise on a budget package that increased the marginal tax rate and phased out exemptions for high-income taxpayers. Despite his repeated demands for a reduction in the capital gains tax, Bush had to surrender on this issue as well. His popularity among Republicans never fully recovered, and the compromise plan reduced the size of the deficit only marginally, despite Bush’s claim that it was the toughest deficit reduction package ever approved.
Source: Grolier Encyclopedia on-line, “The Presidency” , Dec 25, 2000

"Read My Lips" did not promise to cut taxes

Bush had made his famous tax pledge at the 1988 Republican convention. "Read my lips," he proclaimed, "no new 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.

Source: Newt!, by Dick Williams, p.123&125 , Jun 1, 1995

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

In early 1993, from outside the White House, Adviser James Carville was furious. He knew the policy people and the president had to make the decisions on the economic plan. But he told others that if an energy tax were actually proposed, he would break ranks and personally lead the war against it. "The Republican Party is in shambles," Carville noted. A new tax could provide a rallying point. "This could be the issue that galvanizes them." The new taxes in 1990 had effectively caused the right wing of the Republican Party to rise up against Bush. Even Bush had finally admitted the new taxes were a political mistake. It was the one thing Republicans might agree on.
Source: The Agenda, by Bob Woodward, p.129 , Jun 6, 1994

Better to enact tax increase than to have recession

Author's note: Bush took to the airwaves to urge passage of the controversial budget agreement he had reached with the Democrats. The agreement gained some notoriety because, among the spending restraints and tax cuts, it also included a tax increase in the 28% income tax bracket to 31.5%--and violated Bush's "no new taxes" pledge.

"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.)

Source: Heartbeat, by Jim McGrath, p. 96-97 , Oct 2, 1990

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Other past presidents on Tax Reform: George Bush Sr. on other issues:
Former Presidents:
Barack Obama(D,2009-2017)
George W. Bush(R,2001-2009)
Bill Clinton(D,1993-2001)
George Bush Sr.(R,1989-1993)
Ronald Reagan(R,1981-1989)
Jimmy Carter(D,1977-1981)
Gerald Ford(R,1974-1977)
Richard Nixon(R,1969-1974)
Lyndon Johnson(D,1963-1969)
John F. Kennedy(D,1961-1963)
Dwight Eisenhower(R,1953-1961)
Harry S Truman(D,1945-1953)

Past Vice Presidents:
V.P.Joseph Biden
V.P.Dick Cheney
V.P.Al Gore
V.P.Dan Quayle
Sen.Bob Dole

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Page last updated: Feb 22, 2022