Profits, Taxes, and the State

Profits, Taxes, and the State

Profits, Taxes, and the State

Profits, Taxes, and the State

Synopsis

The 1981 Reagan tax cut was supposed to lead to increased profits, savings, and investment. Likewise, the 1986 Tax Reform Act cut the marginal tax rates to promote savings and investment. As another debate begins over cutting capital gains and other taxes to promote savings and investment, Jankowski examines the impact of these previous efforts and proposes new theories of the state and classes.

Excerpt

The 1980s witnessed political and economic changes in the United States so dramatic that they severely challenge long-held theories of the state, classes, and macroeconomic policy; and they demand that these theories be seriously reevaluated and overhauled. a revolutionary change in a broad range of public policies has occurred: Keynesian fiscal policies have been replaced by supply-side oriented policies, mass deregulation of industry following decades of government regulation has occurred and continues to increase, and there has been a substantial cutback in social welfare programs. the fdr New Deal and Johnson Great Society political coalition no longer survives. It has been replaced by a new neo- conservative-religious political coalition. But in the wake of these far-reaching changes there has been little review of these new policies to determine whether they were successful in achieving their goals: stimulating economic growth, controlling inflation, and increasing economic efficiency. Only by fully understanding the effects of these policy changes can we begin to understand the political and intellectual processes that gave rise to this revolutionary change in public policies, and make suggestions for change.

How did these major political and economic transformations come to pass? I argue that the economic crisis of the 1970s, specifically the stagflation and low growth rates, undermined Keynesian policies and concurrently led to a political transformation and policy shift that persists to this day. Because the economic crisis gave impetus to the political and policy changes that subsequently transpired, I focus initially on the economic crisis and the policy changes it induced. I start with the changes in tax policy because they are a linchpin of all the changes. Tax law changes were undertaken to offset a decline in profitability, witnessed in the late 1960s and 1970s, and hence, the stagflation of the 1970s.

As a result, tax policy has been one of the central issues of U.S. domestic politics during the 1980s and probably will be for the balance of this century. Ronald Reagan began the transformation process with the Economic Recovery Tax . . .

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