Thursday, May 14, 2009

Obama should also roll back Reagan tax cuts

Most religions recognize excessive hoarding as a sin. Accumulating food, money, land or other resources to the detriment of the community and society has been widely condemned since ancient times.

A policy of tax cuts and laws advantageous to the rich that started in the Reagan years has allowed the wealthy to become wealthier, while the poor have become poorer. Whatever "trickle down" has happened, has been of very limited scope.

The massive enrichment of the wealthy resulted in "problems" in investing the money in such a way that the rich could still become even more richer.

This is where the derivatives and hedge funds come in. These economically-unhealthy funds were created something close to a no-lose situation for the super-wealthy. They allowed the rich to create massive hoards of cash preventing capital from recycling into the economy.

Here are some figures showing both the first bracket tax rate for lowest income earners, and the top bracket for the richest Americans, since 1964.


1964 - 16% 77% IRS
1965-1967 - 14% 70% IRS
1968 - 14% 75.25% IRS
1969 - 14% 77% IRS
1970 - 14% 71.75% IRS
1971-1981 15 brackets 14% 70% IRS
1982-1986 12 brackets 12% 50% IRS
1987 5 brackets 11% 33% IRS
1988-1990 3 brackets 15% 28% IRS
1991-1992 3 brackets 15% 31% IRS
1993-2000 5 brackets 15% 39.6% IRS
2001 5 brackets 15% 39.1% IRS
2002 6 brackets 10% 38.6% IRS
2003-2009 6 brackets 10% 35% Tax Foundation

Notice in 1982 the tax rate on the richest income earners, which had ranged from 77% to 70% in previous years, drops by about 29 percent in 1982 due to the Reagan tax cut in 1981.

In comparison, the rate for the poorest folk required to pay income tax dropped by only about 14 percent.

From that point onward, the rate on the highest bracket continues to decline down to 35 percent. Also the number of tax brackets declines from 15 in 1982 to only 6 in 2009.

If we compare the average tax rates from those years before 1982 in the above figures, there is a more than 50 percent drop for the wealthiest taxpayers compared to only 29 percent for the poorest ones.

Such favoritism for the rich is key to the current economic debacle. The fact is that minus recycling all this hoarded capital we will probably only see things continue to deteriorate despite the blips one might witness in the stock market.

So rolling back the Bush tax cuts probably will not be enough. There will only be a marginal increase in revenues. We need to start rolling back all the tax cuts and favors legislated for the super rich since the Reagan years in order to start dealing with the multi-trillion dollar deficits. Otherwise we will not have to wait until our "grandchildren's time" to see more repercussions resulting from decades of hoarding by the richest of the rich.

1 comment:

Stockcalamity_logic said...

Well, Reaganomics were in a different economic era as now. I feel we are moving towards what economics call a "Laffer Curve" where tax cuts beyond a point will significantly affect government revenues. Does this make sense?

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