Two points about Reagan's tax cuts (and the problem with liberal tax policies):
Point 1: You are only considering one side of the equation. You have to consider not only the revenue side, but also the spending side. Revenues went up after the Reagan tax cuts--even though we were in a recession at the time. Unfortunately spending went up faster than revenues. Reagan was dealing with an all-Democratic Congress. They were willing to pass the tax cuts, but were not willing to reign in spending and rejected every budget Reagan submitted.
Point 2: At the time of Reagan's tax cuts, the top marginal tax rate was 70%! In addition, the tax brackets were not indexed for inflation, so each year taxpayers were forced into higher tax brackets by inflation. Reagan's tax cut reduced the top marginal rate to 28% and got rid of the inflation "bracket creep." Is anyone willing to seriously argue that the US would be better off economically today had the top marginal rate stayed at 70% and tax rates not been indexed for inflation?
I'm so sick of politicians stoking class envy in order to gain political points. We need to get away from the notion of using the tax code as a means of wealth redistribution. The goal of equally dividing the economic pie while retaining prosperity at the same time is utopian. This idea was at the root of communism ("from each according to his ability, to each according to his need"). It cannot be implemented without a totalitarian government because it robs workers and investors of the fruits of their labor and risk-taking and thus violates the human spirit and staunches innovation. People will not willingly submit to such a system without force. Everywhere it has been tried, it has impoverished the people it proported to help; hence--just as Reagan presciently predicted--it has been "consigned to the ash heap of history."
Liberals will argue that what they're advocating is not communism. I agree that it's not communism; however, I would argue that as our income tax system becomes more and more graduated it moves us along a continuum that leads ultimately to communism. Certainly the 70% tax rates that Reagan inherited were way too far down that continuum.
The free enterprise system cannot exist unless there is a gap between rich and poor. The beauty of it is that, in general, as the rich get richer, the poor also get richer.* Most folks in America that are considered "poor" would be considered wealthy in most other parts of the world. This is the result of capitalism being allowed to flourish.** The problem with liberals is that they focus so much on the delta between the rich and "poor" that they fail to notice that we're all getting better off.
Bottom line: Our free-enterprise, capitalist system has created an incredibly large big economic pie. If we try to divide the pie equally, the pie will get much, much smaller. Let's enjoy what we have and quit fretting because someone else is getting a bigger piece.
Footnotes:
*There are, of course, exceptions such as homelessness. However, based on what I've heard, read & experienced, homelessness in the majority of cases is due to factors that are primarily non-economic such as substance dependencies or mental illness rather than "oppression of the poor by the rich." Should we talk about how to help those unfortunate folks? Yes. However, that's not really relevant to this debate (unless liberals want to invoke class envy here too). Another factor that has slowed our prosperity is the growth in the percentage of single-parent homes over the last decade or two. Again, that's a social issue--not a problem with capitalism.
**I'm not advocating here a capitalism that is unrestrained by any government regulations. Capitalism, in order to flourish, does require some degree of government regulation in order to restrain mankind's "darker side" (so that the rich can't exploit the poor, so that corporations can't trash the environment in pursuit of maximum profit, etc.). However, such regulations should not have the effect of robbing the rich to give to the poor. |
