INSTITUTE FOR POLICY RESEARCH

'Starving the Beast' Traces Origins of the GOP’s Tax Policy

Monica Prasad examines how tax cuts became a dominant policy issue in the Republican Party

IPR sociologist Monica Prasad examines how Republicans became the party of tax cuts in 'Starving the Beast.'

What led Republicans to make tax cuts a defining policy of the modern conservative party?

This is the question that IPR sociologist Monica Prasad examines in her latest book, Starving the Beast: Ronald Reagan and the Tax Cut Revolution (Russell Sage Foundation, 2019).

Prasad examines the origins of the Republicans' focus on tax cuts by tracing the policy shift starting with the Economic Recovery Tax Act of 1981, the largest tax cut in U.S. history, from its inception in the mid-1970s to the passing of the law during Reagan’s first year in office.

“We tend to forget that Republicans were not always the party of tax cuts,” Prasad explained. “When [President] Ford wanted to cut taxes in the 1970s, it was conservative Republicans who were against. Within a few short years, what it meant to be a Republican completely changed.” 

By using archival documents from the Ronald Reagan Presidential Library, Prasad found that business groups were not driving Reagan’s focus on tax cuts, as often thought. She shows instead that the 1981 tax cut arose from the interaction of the American economy’s unusual fixation on progressive taxation within the context of inflation in the 1970s. Moreover, she argues that the tax cut episode shows how the normal and healthy functioning of democracy can create a conflict among citizens that did not exist before. She speculates on how this dynamic can be dampened.

Prasad revises the narrative around key players behind the Republicans’ focus on tax cuts—such as then-Republican congressman Jack Kemp—through the archival documents, which took her nearly a decade to obtain.

“One thing I could do with the documents is explain the whole story—not just how a bill becomes a law, but how a very small group of individuals completely transformed a political party, and therefore completely changed American politics,” Prasad said. ­­

Another key takeaway from Starving the Beast is that significant tax cuts are a distinctly American phenomenon. In contrast to other countries, the United States is unusual for maintaining a low level of tax revenue as a percentage of GDP, despite the rise of GDP over the last several decades. Prasad argues that the U.S. can learn from a European-style tax policy that embeds progressive policies into a system that also promotes businesses and encourages economic growth.

Beyond informing readers about the history of the tax cut policy, Prasad’s book also has implications for today’s Republican Party. Prasad explains that opposition to taxes is lower among the public than it has been in previous decades, giving Republicans the need to mobilize around a new policy issue.

“Republicans are obsessed with tax cuts not because of business power, but because tax cuts are the only issue that unifies their coalition, and they will only abandon tax cuts if they can find some other issue that can do the same,” Prasad said.

“We're still living in the political age that Reagan and his colleagues created, although it does look like we might be starting to see the end of that age,” she continued. “Tax opposition is lower among the public than it has ever been, and that means tax cuts are not the magical policy they have been for Republicans for much of the last four decades.”

This means the party is facing a “dangerous moment” that could take it down a darker path, making appeals based on race and ethnicity for electoral reasons, she said.

“It's an institutional matter more than a matter of ideology or individual belief,” Prasad said. “For any Republicans out there who don't like that prospect, my book shows you exactly what you need to do to save your party.”

Monica Prasad is a professor of sociology and an IPR fellow.

Published: March 6, 2019.