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Margaret Thatcher, Conservative Icon, Raised Taxes To Balance The Budget

Apr 08, 2013 | Updated Apr 09, 2013

Margaret Thatcher may be best known in the U.S. for her intellectual and personal ties to Ronald Reagan. But despite her ideological closeness with the Republican hero, many in the current GOP establishment have distanced themselves from one of her policies: raising taxes.

Thatcher, the former British prime minister who died Monday, revolutionized the UK economy through free-market policies that included cuts to the British welfare state and the sale of government-owned industries. She also had a laser-focus on the traditionally conservative goal of cutting the deficit and balancing the budget -- and she was willing to raise taxes to achieve that goal.

In her first budget proposal, Thatcher slashed income taxes. But in order to pay for the revenue loss, she raised the Value Added Tax -- the UK’s equivalent to the sales tax, according to a 1990 report from a resident scholar at The Heritage Foundation, a conservative think tank. As Bruce Bartlett, a former policy adviser to Reagan and George H. W. Bush, notes, taxes as a share of the economy actually increased under Thatcher.

Reagan also enacted the largest tax increase in four decades, according to Joseph J. Thorndike, the director of the Tax History Project at Tax Analysts. But Reagan obscured the tax increases by calling them a different name: "revenue enhancements" that were achieved by closing loopholes in the tax code.

Contrast that with today’s Republicans, many of whom are obsessed with curbing the deficit, but refuse to use tax increases to achieve that goal. A few years ago, 95 percent of Republicans signed a pledge circulated by Grover Norquist, the leader of Americans for Tax Reform, agreeing to never raise taxes.

Though many Republicans have since backed away from the commitment, GOP leaders still took a hard stance on tax increases during the fiscal cliff and debt ceiling negotiations, vowing not to raise taxes unless they got spending cuts in return.

As left-leaning MSNBC host Rachel Maddow noted in a blog post Monday: “Thatcher ... was more interested in deficit reduction and balanced budgets than tax policy. She was, in other words, in line with the traditional fiscal priorities of the Republican Party before its supply-side revolution prioritized tax cuts above all.”

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