Over the past two decades the Republican Party has undergone a radical transformation, reorganizing itself around a grotesque proposition: that the wealthy should grow wealthier still, whatever the consequences for the rest of us. Click through to find out how the Party of Reagan – which at least understood that higher taxes on the rich are sometimes required to cure ruinous deficits – became, quite simply, the Party of the One Percent – the Party of the Rich.
From the end of World War II to the eve of the Reagan administration, both parties saw taxes as an otherwise uninteresting mechanism to raise the money required to pay the bills. The biggest tax cut was secured by John F. Kennedy, whose across-the-board tax reductions were actually opposed by the majority of Republicans in the House. Even after the Kennedy cuts, the top tax rate stood at 70 percent – double its current level. Steeply progressive taxation paid for the postwar investments in infrastructure, science and education that enabled the average American family to get ahead.
In the late 1970s, high inflation drove up wages and pushed the middle class into higher tax brackets. Harnessing widespread anger, Ronald Reagan put it to work on behalf of the rich, selling the country on an "across-the-board" tax cut that brought the top rate down to 50 percent. It was the birth of what is now known as "Starve the Beast" – a conscious strategy by conservatives to force cuts in federal spending by bankrupting the country.
The Reagan tax cuts spiked the federal deficit to a dangerous level, even as the country remained mired in a deep recession. Republican leaders in Congress immediately moved to reverse themselves and feed the beast. It was a Republican who led the effort in 1982 to undo about a third of the Reagan tax cuts: Sen. Bob Dole. Even Reagan embraced the tax hike, David Stockman, who served as budget director under Reagan, says, "because he believed that, at some point, you have to pay the bills."
For the remainder of his time in office, Reagan repeatedly raised taxes to bring down unwieldy deficits. Today, Reagan may be lionized as a tax abolitionist, says Alan Simpson, a former Republican senator and friend of the president, but that's not true to his record. "Reagan raised taxes 11 times in eight years!"
Reagan wound up sowing the seed of our current gridlock when he gave his blessing to Americans for Tax Reform. Headed by Grover Norquist, the group originally set out to prevent Congress from backsliding on the 1986 tax reforms. But Norquist's instrument for enforcement – an anti-tax pledge signed by GOP lawmakers – quickly evolved into a powerful weapon designed to shift the tax burden away from the rich. George H.W. Bush won the GOP presidential nomination in 1988 in large part because he signed Norquist's "no taxes" pledge.
Once in office, Bush moved to bring down the soaring federal deficit by hiking the top tax rate and adding surtaxes for yachts, jets and luxury sedans. The tax hike helped the economy – and many credit it with setting up the great economic expansion of the 1990s. But it cost Bush his job in the 1992 election – a defeat that only served to strengthen Norquist's standing among GOP insurgents. "The story of Bush losing," Norquist says now, "is a reminder to politicians that this is a pledge you don't break."
After taking office, Bill Clinton immediately seized the mantle of fiscal discipline from Republicans. He set out to balance the budget and begin paying down the national debt. To do so, he hiked the top tax bracket and boosted the corporate tax rate. "It cost him both houses of Congress in the 1994 midterm elections," says Lincoln Chafee, a former GOP senator. "But taming the deficit led to the best economy America's ever had." By the spring of 1997, the federal budget was headed into the black.
Newt Gingrich and the anti-tax revolutionaries who seized control of Congress in 1994 responded by going for the Full Norquist. In a stunning departure from America's long-standing tax policy, Republicans moved to eliminate taxes on investment income and to abolish the inheritance tax. Under the final plan they enacted, capital gains taxes were sliced to 20 percent. Far from creating an across-the-board benefit, 62 cents of every tax dollar cut went directly to the top one percent of income earners.
George W. Bush was the first president of the Party of the Rich. Within months of taking office, he killed a project to shut down offshore tax havens in places like the Cayman Islands, havens that were costing U.S. taxpayers $70 billion a year. He then pushed to deliver $1.6 trillion in tax cuts for the wealthiest individuals. The White House justified the push by assuming the economy would continue to boom. However, amid signs of a looming recession, the Bush team dreamed up a new (and bogus) rationale for cutting taxes: to provide a needed jolt to the economy. Under the new cuts, passed in May 2001, the bottom fifth of income earners could expect to pocket an extra $744 over ten years; the top one percent, $340,000.
After the GOP regained control of the Senate and expanded its majority in the House, Vice President Dick Cheney led the push for an even deeper tax cut for the wealthy. He had to overcome opposition not only from Federal Reserve Chairman Alan Greenspan but from some of Bush's top advisers. In April 2003, when the bill reached the floor, the Senate deadlocked 50-50. The vice president cast the deciding "aye" that moved the tax cut into law. The benefits were even more tilted to the rich than the first Bush tax cuts. When fully phased in, 53 percent of the new cuts went to the top one percent. Those making $10 million or more pocketed an average of $1 million a year.
The little-noticed American Jobs Creation Act of 2004 allowed corporations to bring home billions in profits they had stockpiled in offshore tax havens. Under the tax amnesty, corporations repatriated $300 billion in profits they had stashed offshore. But instead of paying the nominal corporate tax rate of 35 percent, they were taxed at just 5.25 percent. Corporations invested almost none of their windfall in new factories or other measures to create the 500,000 jobs that Republicans had promised. In fact, many companies that received the biggest tax break actually slashed jobs.
Under the 2008 Troubled Asset Relief Program, overseen by Treasury secretary and former Goldman, Sachs CEO Hank Paulson, taxpayers were forced to give banks $254 billion for assets worth just $176 billion – a handout of $78 billion to the financial sector, including $2.5 billion for Paulson's cronies at Goldman. "Paulson pushed the money into the hands of the banks – no strings attached, no accountability, no transparency," Elizabeth Warren, then-chair of the Congressional Oversight Panel, told Rolling Stone last year.
Even the $787 billion stimulus engineered by President Obama was hamstrung by his predecessor's ongoing giveaway to the wealthy: Republicans insisted on a $70 billion handout that inflated the cost of the stimulus package without stimulating anything – other than the paychecks of rich Americans.
Within days of the 2010 midterm elections, Republicans not only secured a two-year extension of the Bush tax cuts for the wealthy, they also enabled America's richest scions to inherit up to 5 million dollars without paying a dime in taxes.