A Look Back At The 1986 Tax Overhaul Last week, President Obama said that in the upcoming year, he'd like to push for a broad overhaul of the tax code. The president said he wants to broaden the tax base, close loopholes and make the system more efficient. This desire is not new in Washington. But the biggest tax overhaul in recent history occurred in 1986 in the Reagan administration. NPR's Robert Siegel takes a look back at that effort with Alan Murray, deputy managing editor for the Wall Street Journal and co-author of Showdown at Gucci Gulch: Lawmakers, Lobbyists and the Unlikely Triumph of Tax Reform, a book about the '86 tax reforms.
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A Look Back At The 1986 Tax Overhaul

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A Look Back At The 1986 Tax Overhaul

A Look Back At The 1986 Tax Overhaul

A Look Back At The 1986 Tax Overhaul

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Last week, President Obama said that in the upcoming year, he'd like to push for a broad overhaul of the tax code. The president said he wants to broaden the tax base, close loopholes and make the system more efficient. This desire is not new in Washington. But the biggest tax overhaul in recent history occurred in 1986 in the Reagan administration. NPR's Robert Siegel takes a look back at that effort with Alan Murray, deputy managing editor for the Wall Street Journal and co-author of Showdown at Gucci Gulch: Lawmakers, Lobbyists and the Unlikely Triumph of Tax Reform, a book about the '86 tax reforms.

ROBERT SIEGEL, Host:

Last week, as President Obama was defending his tax deal with Republicans, he also spoke of another tax-related mission. He said it would involve sorting out what government does that's helpful from what isn't and figuring out how we pay for it.

BARACK OBAMA: That's going to mean, you know, looking at the tax code and saying, you know, what's fair, what's efficient. And I don't think anybody thinks the tax code right now is fair or efficient.

SIEGEL: Making the tax code more fair and more efficient is a common ambition for a president. Back in 2004, right after his re-election, President George W. Bush said this.

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GEORGE W: We must reform our complicated and outdated tax code.

SIEGEL: But when people in Washington look for precedent for an overhaul of the tax code, the most recent big example was almost a quarter of a century ago. That was when President Ronald Reagan signed the Tax Reform Act of 1986 into law.

(SOUNDBITE OF ARCHIVED AUDIO)

RONALD REAGAN: Millions of working poor will be dropped from the tax rolls altogether, and families will get a long overdue break with lower rates and an almost doubled personal exemption. We're going to make it economical to raise children again.

SIEGEL: The story of how that tax bill was passed was the subject, soon afterwards, of a book by two Wall Street Journal reporters, Alan Murray and Jeffrey Birnbaum. It's called "Showdown at Gucci Gulch," and Alan Murray joins us from New York, where he's now executive editor online for the Wall Street Journal. Welcome to the program once again.

ALAN MURRAY: Good to be with you.

SIEGEL: And first, what did that big tax bill do back in 1986?

MURRAY: You know, even after the 1981 tax cuts, you still had a top tax rate of 50 percent. So rates were very high for upper-income people. It brought down tax rates, but then it made up for that by closing loopholes. So it took the money from closing loopholes and used it to pay for lower rates.

SIEGEL: What made it politically possible for, say, Ted Kennedy and Barry Goldwater to join 72 other senators in voting for this same big tax bill?

MURRAY: And the Tax Reform Bill of '86 was a means of accomplishing both of those very partisan goals in a nonpartisan way.

SIEGEL: Looking ahead now to the coming Congress, with the Democrats still running the Senate but a new GOP majority in the House, President Obama in the White House, do the stars appear to be aligned to achieve another big rewrite of the tax code?

MURRAY: And what I think has happened over the last 25 years is much of that cadre of professional, largely nonpolitical people in Washington has been blown up. Everybody's political in Washington these days. And that's going to make it much, much more difficult to put a deal like this together.

SIEGEL: Well, Alan Murray, thanks for talking with us about the Tax Reform Act of 1986.

MURRAY: Great to be with you to relive that bit of history.

SIEGEL: Alan Murray and Jeffrey Birnbaum wrote "Showdown at Gucci Gulch," about how that bill was passed.

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