President Ronald Reagan was a popular United States President. Upon leaving office, 63 percent of Americans overwhelmingly approved of the job he had done during his 8 years in office. His post-presidency popularity was solidified with efforts led by lobbyist and anti-tax activist Grover Norquist to convince local governments and private associations to name public spaces after Regan to preserve his legacy— particularly his tax legacy.
Since the enactment of his tax policies, very few politicians have really criticized or even analyzed the effects of the radical tax cuts enacted under Reagan. As many know, prior to those cuts, the tax code had many more brackets. At one time, the top bracket, on income over 108,000 dollars was 70 percent. Reagan reduced the top rates to 50 percent and then eventually to just 37 percent and reduced the number of brackets.
The previous high rates had the effect of discouraging wealth accumulation and re-distributed wealth, a function of the income tax abandoned by Reagan’s cuts. This was all based on the failed theory of “trickle-down” economics. The idea that with less paid in taxes, the extra money would be spent on expanding businesses, creating new jobs, and helping middle-class workers. That never happened, yet it has been touted as a benefit by every Republican tax-cut since. Instead, all they’ve done is destroy the middle class and created the huge disparity in wealth seen today.
Opponents of the old rates will present all kinds of dire economic predictions about its negative impact on the economy, but look back at those years: 1940’s through the 1970s. Then, things went pretty well for the American economy. The only downside was runaway inflation in the ’70s and ’80s, which was largely due to printing money to pay for the Vietnam War. During this time period, President Lyndon Baines Johnson’s programs helped the poor; we put a man on the moon, employment was high and American companies were the epitome of world manufacturing.
The argument for reducing brackets and cutting rates still dominates our tax discourse today. President Trump claimed before passing his massive tax cut that cutting the number of brackets made paying taxes easier for taxpayers— That’s bullshit. I’ve never met anyone who couldn’t figure out their tax bracket. Cutting brackets inherently favors the rich because the brackets eliminated have to be upper ones, which only affect the rich. Meanwhile, the middle class sees little, if any, tax relief. And now, with the rich essentially paying the same taxes, and in many cases lower taxes because of tax breaks aimed at protecting the rich and other loopholes, the rich have pulled away, starting a 50-year explosion of a wealth gap that has left the middle class in the dust and struggling to maintain their basic needs.
Some propose a “wealth tax” to make the rich pay their fair share, but personally, I think a wealth tax isn’t a great idea because it would be unwieldy and extremely time-consuming and difficult, if not impossible, to audit. That’s why tax increases and brackets like we had prior to Regan’s cuts are the best option instead. There is no doubt in my mind that the disparity we see today started with the Reagan tax cuts. It is time we reevaluate Reagan’s legacy. Were things really that bad for the middle class prior to Reagan’s tax cuts?