The Unlikely Heroes of Progressive Taxation: CEOs’ Support for Bill Clinton’s Tax Increase Package in 1993

Abstract

AbstractOn August 10, 1993, President Bill Clinton signed the Omnibus Budget Reconciliation Act of 1993, one of the largest fiscal deficit-reduction packages in US fiscal history. This law raised the top individual income tax rate from 31% to 39.6%, which increased the average effective tax rate for high-income earners and shifted the federal fiscal balance from deficit to surplus by the end of the century. Given major business interest groups’ criticism of the Omnibus Budget Reconciliation Act of 1993’s heavy reliance on tax increases over spending cuts, how was the Democrat-controlled Congress able to pass this legislation? Drawing on archival evidence from the Clinton Presidential Library, this paper shows that the administration and Democratic committee chairs mobilized support from corporate CEOs, including Fortune 500 executives, asking them to lobby key legislators to support the bill. Thus, with business leaders’ support and lobbying efforts, the legislation was passed with a very slight majority.