Newspaper article The Record (Bergen County, NJ)

A History Lesson on Tax Cuts in America

Newspaper article The Record (Bergen County, NJ)

A History Lesson on Tax Cuts in America

Article excerpt

To stimulate the U.S. economy to "levels you haven't seen in many years"— President Donald Trump is proposing to cut federal income taxes, for most folks in general, but predominantly for really affluent families and mega-corporations. His proposal is so skewed to the wealthy that over the next 10 years, more than half of his multitrillion-dollar tax cut will go to the wealthiest 1 percent. Big business does well, too, gaining an estimated $4.1 trillion tax cut during the next decade. And that's not the only justification offered for the president's full-on, supply-side tax cut. According to Senate Majority Leader Mitch McConnell, R-Ky., this tax cut will "create so much economic growth, it [will] begin to pay down the nation's debt." Which sounds too good to be true — because it is.

By now, every American who is objective or can do math should know that the proposed supply-side tax cuts won't work as promised. Why expect certain failure? First and foremost is something called "history." Supply-side tax cuts have never worked as promised. Never. Second, focusing tax cuts on affluent individuals and corporations is not an effective way to stimulate private sector job growth—which pretty much explains why history has proven supply-side economic theory is bogus.

Start with history first. Top federal income tax rates for individuals were very high from the end of World War II through 1980—ranging from 90 to 72 percent. During that sequence, the U.S. economy grew at an average rate of 3.8 percent per year, in real, inflation-adjusted terms. Meanwhile income distribution slightly favored the top, with the wealthiest 10 percent realizing roughly 34 percent of all growth in income over that period, leaving 66 percent of income growth for the bottom 90 percent in earnings to share. Still, these were pretty good times, that included a strong middle class and real income growth for all earners.

Then came supply-side under President Reagan, who cut the top marginal income tax rate from north of 70 percent to 38.5 percent in 1981. President George W. Bush then cut the top rate down to 35 percent in 2001, while also cutting capital gains and dividend tax rates, which all primarily benefited the most affluent. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.