The Largest State Tax Increase in History?

According to Bruce Bartlett, who worked as a senior policy analyst in the Reagan White House, the award for the largest state tax increase proposed by a governor in U.S. history goes to his former boss. As we honor the centennial anniversary of the birth of former California Governor and President Ronald Reagan, it is only fitting to give credit where credit is due. Governor Reagan’s 1967 tax plan – equal to nearly a third of 1967-68 General Fund spending – stands as the largest state tax increase not only here in California, but for the nation as a whole. The Reagan plan, according to Bartlett, raised the top income tax rate from 7 percent to 10 percent, the sales tax rate from 3 percent to 5 percent, the cigarette tax rate from 3 cents to 10 cents per pack, the alcohol tax from $1.50 to $2 per gallon, the bank and corporate tax rate from 5.5 percent to 7 percent, and the inheritance tax rate from a range of 2 percent to 10 percent to a range of 3 percent to 15 percent.

More importantly, the Reagan tax increase set the stage for a period of strong economic growth and provided the resources needed to support good schools, an expanding university system, and a strong safety net. And for that, our former Governor and President should be remembered. The second largest increase in California history? Measured as a share of state spending, the silver medal goes to the 1991 increase signed by Governor Pete Wilson in a budget agreement that bears similarity to the spending plan pending before the Legislature today: roughly equal levels of spending reductions and revenue increases coupled with a significant shift, or “realignment,” of program responsibility from the state to local governments.

 — Jean Ross