Donald Trump Thought Ronald Reagan's Tax Cuts Were A 'Disaster'

He argued in favor of raising income taxes, claiming it would encourage investment.

The United States doesn't win anymore. Anybody who's watched five minutes of Donald Trump knows as much. What is less known is that Trump dates the start of the losing streak to one surprising loser: Ronald Reagan.

One of Reagan's signature achievements was a massive 1986 tax bill that slashed the top marginal income tax rate from 50 percent all the way down to 28, and paid for it largely by raising taxes on investment income and closing loopholes.

Many analysts credit that reform with simplifying the tax code, while roughly maintaining the tax burden on the wealthy.

Trump, now the leading presidential candidate for a party in which Reagan enjoys demigod status, is not one of them.

“What caused the Savings and Loan crisis, other than incompetence and various other things, was the 1986 tax law change. It was a disaster. It took all of the incentives away from investors, etcetera, etcetera, and it was a disaster," he told Joan Rivers in 1990.

"But that was really the primary, in my opinion, that was the primary problem with the Savings and Loan," he continued. "That’s why the country is losing billions and hundreds of billions dollars today because of a mistake in the tax law."

Donald Trump loved the 1980s, but hated the decade's signature tax reform.
Donald Trump loved the 1980s, but hated the decade's signature tax reform.
Joe McNally/Getty Images

Trump has often talked about tax rates and their power to incentivize investment -- using some unconventional economic arguments.

During the credit crunch between 1990 and 1992, Trump proposed hiking income taxes to boost investment and lending.

“I like to say that you can spur the economy through taxes so that the economy actually gets good,” Trump testified to the House Budget Committee.

Trump made it clear that he literally meant taxes, not tax cuts. Asked by Rep. Hal Rogers (R-Ky.) if he was suggesting raising income taxes on high earners to fill a gap in government revenue, Trump confirmed that he was, because he believed it would stimulate investment.

“Yes sir, I would do that because I believe strongly that people don’t have enough incentive to invest right now at 25 percent. I just don’t believe they have enough incentive to take the risk of investment," he responded.

"The higher [the income tax] is, the more incentive there would be,” Trump later said. “I guess it was 50 and it was 60 at one point and it was obviously even higher than that, but the higher it is, the more incentive. And I don’t mean middle income and I don’t mean low income. If anything, that could be -- stay the same or be lowered. But, I’m talking about the people that are making a great deal of money should have an incentive to invest, and I know it was 50, and I'm talking about a substantial increase."

“I like to say that you can spur the economy through taxes so that the economy actually gets good.”

- Donald Trump, House Budget Committee hearing, 1991

Trump did stipulate, however, that if those wealthy individuals then chose to invest their incomes in real estate and other areas, their income should be taxed at “the minimum level.”

Trump’s proposal is certainly not conservative, but it is apparently not liberal either.

Dean Baker, co-director of the progressive Center for Economic and Policy Research, told The Huffington Post it is “unlikely” that higher income tax rates would, in themselves, stimulate higher investment.

Instead, like many of Trump’s theories, it appears to be improvised.

That may be because Trump’s argument emanates from a negative personal experience with Reagan’s '86 tax cut, which Trump essentially proposed reversing in his 1991 testimony.

The '86 reform may have had a negligible impact on the wealthy, but there was one slice of the 1 percent that didn't fare so well: the real estate industry. At the very end of negotiations around the the massive bill, the lawmakers were still far short in making up the revenue they needed to give such a huge tax break to the top bracket. They landed squarely on real estate, stripped major real estate tax shelters and took the extraordinary step of making the repeal retroactive. The scene is relayed in the seminal book on the bill, Showdown At Gucci Gulch. As Trump said, the bill "was a disaster."

Trashing Reagan might fit into Trump's pox-on-every-politician approach to politics, but the tycoon has borrowed at least one element of Reagan's campaign already: his slogan.

Reagan launched his presidential campaign in Philadelphia, Mississippi, famous as the town where three civil rights activists had been murdered. His slogan and his rhetoric called for the country to return to the 1950s, a period he talked of as idyllic. It was also, not coincidentally, before the civil rights movement.

Editor's note: Donald Trump is a serial liar, rampant xenophobe, racist, birther and bully who has repeatedly pledged to ban all Muslims -- 1.6 billion members of an entire religion -- from entering the U.S.

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