The top economic issue of this year's election will be Bob
Dole's tax-cut proposal. Is it a replay of President Reagan's
budget-busting "voodoo economics," or a common-sense plan to
provide tax relief and more jobs?
"When I was in the movies," Mr. Reagan told the Washington Post
in 1981, "I would reach the point each year when, after the second
movie, I'd be in the 90 percent bracket, so I wouldn't make any
more movies that year. And it wasn't just me. Bogart and Gable and
others did the same thing."
Actually, the top marginal income tax rate was 91 percent at
that time, and America's home builders and business owners got the
same message as the Hollywood stars: Why work and risk capital to
build another house or store if the government is going to
confiscate 91 percent of your income? The bottom line is that this
soak-the-rich tax rate produced more leisure for movie stars and
entrepreneurs and more unemployment for carpenters and stage hands.
In the early 1960s and 1980s, Presidents Kennedy and Reagan both
faced faltering economies with high jobless rates. Both recognized
that high taxes curtail economic growth. To stimulate the economy,
Kennedy's tax program reduced the top marginal income tax rate from
91 percent to 70 percent. Under Reagan, the top marginal income tax
rate was slashed to 28 percent. The result? Two economic booms.
Following Kennedy's tax cut, annual economic growth jumped to
5.2 percent between 1964 and 1969, more than double today's rates.
Reagan's tax cuts were followed by the longest peacetime economic
expansion in United States history - November 1982 through July
1990 - enlarging the nation's real income, adjusted for inflation,
by one-third, producing 19.3 million jobs and the lowest
unemployment rate in nearly 20 years.
"The trickle-down policies of the 1980s," says President
Clinton, "benefited the wealthy at the expense of the middle class
and the working poor." In fact, the average real income of every
group rose each year from 1983 to 1989. Census Bureau data show the
real income of the poorest 20 percent of households rose 10.7
percent from 1981 to 1989, after falling 11.6 percent from 1977 to
1981. Among black families, real median income increased 16 percent
from 1982 to 1990, after declining 15 percent from 1973 to 1980.
Over the past two decades, it was only during the Reagan years
that the real incomes of the poorest 20 percent of families
increased. The incomes of these families nose-dived during the
Carter years and decreased by 8 percent in the 1990s. America's
poverty population, after growing by 7 million in the Carter years
and shrinking by 4 million in the Reagan terms, has increased by 6
million since 1989.
The economic record of the past four decades shows that all
income groups benefit from pro-growth policies that lower taxes on
work, savings, entrepreneurship, and investment. The 2.1 percent
annual job growth during the 1980s created 2. …