Reagan’s record on raising taxes began almost the moment he entered politics. Elected governor of California in 1966, he inherited a large budget deficit from his predecessor, Pat Brown. Although a conservative, dedicated to shrinking government, Reagan nevertheless found the magnitude of spending cuts that would have been necessary in 1967 to be beyond reach. This led him to endorse a $1 billion per year tax increase, equivalent to a $17 billion tax increase today – an enormous sum equal to a third of state revenues at that time. Journalist Lou Cannon recounts the circumstances:
“No amount of budget reductions, even if they had been politically palatable, could have balanced California’s budget in 1967. The cornerstone of Governor Reagan’s economic program was not the ballyhooed budget reductions but a sweeping tax package four times larger than the previous record California tax increase obtained by Governor Brown in 1959. Reagan’s proposal had the distinction of being the largest tax hike ever proposed by any governor in the history of the United States.”
Reagan had little to say about these tax increases in his memoirs except to claim that he gave back $5 billion to taxpayers. However, in many cases, the tax relief consisted of tax rebates and one-shot tax cuts. In the end, it is clear that Governor Reagan presided over an astonishing expansion of taxes in California. According to the California Department of Finance, state revenues tripled from $2.9 billion in the 1966/67 fiscal year to $8.6 billion in the 1974/75 fiscal year, Reagan’s last.