Progressive taxation can fix economic inequality
The United States is a country of ideals. It was founded on freedom and equality and developed from thirteen unrelated colonies into one of the world’s most powerful unions in fewer than two centuries.
During the mid-to-late 1900s, America was the most influential and well-respected nation in the world. Propelled by a robust middle class, we led the world in innovation, education and overall quality of life.
However, the end of the 20th and beginning of the 21st centuries have seen a reversion into old flaws that exacerbate the nation’s income gap and plunge lower-income families into poverty.
During this time, then-President Franklin D. Roosevelt’s New Deal helped put people back to work and rapidly improve the overall quality of life of the lower and middle classes. His tax codes remained essentially unchanged until the 1960s, when the top tax rate – which peaked around 1944 – fell from 90 to around 70 percent, according to the Tax Foundation.
Through this period of high taxes on the wealthy, the lowest tax bracket was between 15 and 20 percent.
This all changed in the 1980s when then-President Ronald Reagan was elected and brought with him a set of new ideas about taxes. Rather than the progressive taxes that had rescued America from the Great Depression and propelled her to preeminence on the global stage, Reagan decided that the best way to increase job growth and prosperity was to drastically cut taxes on the rich.
During his eight years in office, Reagan’s “trickle-down” policies caused the wealthy to be taxed at an incredibly lower rate, down from 68 percent in 1980 to 28 percent in 1988. Simultaneously, he raised the tax bracket for the poorest Americans from below 10 percent to 15 percent.
While the levels have stabilized in recent years, at around 35 percent for the rich and 10 percent for the poor, Reagan’s ridiculous ideas about wealth and capitalism have plunged our nation into a constantly shrinking middle class and worsening income inequality.
According to the Gini index, which measures the income inequality within each nation, the United States ranks 10th among developed countries. However, that number is before taxes. After all income is taxed, America ranks second in income inequality among developed countries.
Clearly there’s a disconnect here. Yes, the wealthy in our country make more than the poor in relation to other developed countries, but the difference is that foreign governments have discovered the (relatively easy) connection between higher taxes on the wealthy and lower disparity. America once had as well.
The difference is that many leaders in our country hold the antiquated notion that unrestrained capitalism will eventually lead to a more stable and healthy economy. That ridiculous idea is the cause of Reaganomics and similar theories that have resulted in a widening divide between the haves and the have-nots.
In 1980, Warren Buffett would have paid 70 percent of his current estimated $13 billion annual income in taxes, while Joey from down the street who works a nine-to-five in a cubicle and makes $50,000 each year (in today’s money) would have given 19 percent to Uncle Sam. At the end of the day, Warren would have walked home with “only” $3.9 billion. Joey would have kept $40,500.
In 2014, Warren Buffett keeps $8.5 billion. Joey keeps $41,500.
That’s a problem, and the only way to combat it is to reform our woefully incompetent tax codes.
Progressives must not let conservatives and their corporate donors drive the agenda lest we let them drive the rest of the country into poverty.
We need to push not just for modest increases in taxes, but for a complete overhaul of our tax code.
Congress must increase taxes on the wealthiest Americans — a progressive tax system — and redistribute that wealth to the impoverished, struggling families and citizens of our nation.
By Brett Stover
