Through much of the 1980s and into the 1990s, deficits were a dominant topic in Washington economic policy discussions. By 1990, annual deficit forecasts exceeding $300 billion—“as far as the eye can see”—were com- mon, so that year President Bush agreed to abandon his “no new taxes” pledge and meet with Democratic leaders of Congress to fashion deficit- reduction legislation. The tortuous negotiations led to the 1990 tax bill, which phased out exemptions and itemized deductions on high-income taxpayers and raised the highest marginal tax rate from 28 percent to 31 percent. Whereas distributional issues have always played a role in tax pol- icy, they played an exceptionally important.
