What's wrong with communism?

[Xugumad]

Originally posted by Tobiasly
Reagan <B>did</B> cut taxes, meaning he cut the tax rate. For example, the highest marginal tax rate on individuals when he took office was 70%, which his tax cut package lowered to 28%.

The result of that is, as you point out, an <I>increase in tax revenues generated</I>. Yes, more money came in to the government, because unemployment dropped and there were more people working and thus paying taxes. But that's what Reagan and company expected to happen, so to say that was a failure of their policy is incorrect.

That is factually wrong, and a fairly common mistake to make for a non-economist.

Here is the breakdown:

The top tax rate was cut, from 70% to 28%, <b>the biggest tax cut in after-war US history</b>. Spending did not decrease, and the economy was not sufficiently stimulated to offset the loss in tax revenue. As a direct result, federal deficit and annual deficit increased sharply; by the summer of 1982, the US was in deep recession. (having briefly overcome some economic difficulties during the first year of Reagan's presidency)

In September of 1982, Reagan's budget included the <b>biggest tax raises in after-war US history</b>. (done partly to work against the rising rate of inflation at the time) In 1986, there was an additional double tax increase, retroactive, on commercial real estate and in capital gains taxes. Simultaneously, there was also a retroactvive decreased depreciation deduction allowance. Those were just some of the examples of sharp tax increases in Reagan budgets. (the one on commercial real estate was particularly catastrophical, triggering the collapse of a whole industry. The effects of 1986 were to some part responsible for the late-80s downturn and the economic problems of the early 90s)

I think "trickle-down", for the most part, works.

Many economist would - regarding the US during the 80s - strongly disagree with that. I'm not going to debate it now, the discussion is significantly too complex to address here; I will, however, name the sources and background information that will help you find out more on the subject. (it'll take a few days to go through my postgrad Economics and Political Science books, if I can find them after moving)

Regarding trickle-down, it's easy to discuss faceless numbers and bare statistics. Having witnessed the stark truth of mass empoverishment in America during the 80s, however, has forever changed some people's views of 'trickle-down'.

Here's another couple of faceless numbers for you:

During the first five years of the Reagan administration, the number of people under the poverty line DOUBLED. (Department of Labor statistics, reported in the Washington Post, May-13-1986)

During the 13 years previous to 1986, real take home wages decreased, adjusted for inflation, by 14.3%. (Associated Press, July-31-1986)

X.