AI
Sunday, August 31, 2025 10:31:20 PM
How four decades of tax cuts fueled inequality
As average people struggle, the wealthy and big businesses benefit.
Jim Steele by James B. Steele November 29, 2022
This story is a partnership between the Center for Public Integrity, a newsroom that investigates inequality, and Bloomberg Tax, a news organization that provides legal and regulatory information for tax professionals and their advisers.
(Tim Foley for the Center for Public Integrity)
A dense fog rolling in off the Pacific enveloped President Ronald Reagan’s majestic 688-acre ranch, high in the hills above Santa Barbara, California.
Visibility was limited, but a crowd of cameramen, photographers and reporters were gathered on that day in 1981 to record the president signing a major piece of legislation.
Wearing jeans, a faded dungaree jacket and cowboy boots, Reagan strolled out of the adobe farmhouse where he and first lady Nancy Reagan were vacationing to a table on the gravel driveway below the house. As he slid into an old leather chair, Reagan flashed his radiant smile to the journalists awaiting the ceremony.
He had much to smile about. Stacked on the table was ERTA, the 185-page Economic Recovery Tax Act of 1981, whose passage fulfilled a campaign promise to cut taxes in a big way.
Signing the bill repudiated everything he had once believed in as a New Deal supporter. ERTA slashed personal, corporate and estate taxes and was stuffed with other tax favors for high-net-worth individuals and corporations. The tax cuts carved a $750 billion hole in the federal budget, prompted cuts in multiple public programs and added to the deficit. The cuts, spread over six years, totaled $2.4 trillion in today’s dollars — basically the cost of the Biden administration’s multi-year, scaled-down Build Back Better bill that never made it out of Congress.
But that was just the beginning. The bill signing on that foggy day set in motion a trend in tax policy that is supercharging America’s escalating income inequality. In the past four decades, Congress after Congress has cut taxes on the richest people and corporations — billions of dollars that would otherwise have gone to the federal till for spending that could help the rest of the public get ahead.
Along the way there were some tax increases, most recently the Inflation Reduction Act signed by President Joe Biden in August that levied a 15% minimum tax on corporations and a 1% excise tax on stock repurchases by public companies. That law was a modest but significant breakthrough for the Democrats after years of Republican-driven tax cuts.
To some, the value of the reforms isn’t just monetary: “They will help restore the public’s confidence in the fairness of our tax system,” said Frank Clemente, executive director of Americans for Tax Fairness, a coalition that advocates for progressive taxation.
These increases notwithstanding, the trajectory over the past two generations has been in the opposite direction.
In 1980, the top income tax rate for individuals was 70%. Today it’s 37%.
The political forces behind that seismic shift haven’t stopped pushing for more. Already, House Republicans are proposing to extend or make permanent some of the most recent tax cuts.
Setting the pattern
Before the income tax was enacted in 1913, average Americans paid the bulk of federal taxes through levies on imported goods. Democrats succeeded in passing the income tax as a way to compel the wealthy to pay more of the cost of running the national government.
Until World War II, the income tax was levied on only the richest Americans. Even after that, the system was designed so people with more money paid higher rates — much higher for the wealthiest.
Elected officials, largely Republicans with some assists from Democrats, have spent the past four decades pulling that system apart.
They’ve tucked large breaks for the rich into proposals with small cuts for millions of other Americans, effectively disguising the main beneficiaries. They’ve promoted tax cuts with claims about economic benefits that have not panned out.
Much more - https://publicintegrity.org/inequality-poverty-opportunity/taxes/unequal-burden/how-four-decades-of-tax-cuts-fueled-inequality/
As average people struggle, the wealthy and big businesses benefit.
Jim Steele by James B. Steele November 29, 2022
This story is a partnership between the Center for Public Integrity, a newsroom that investigates inequality, and Bloomberg Tax, a news organization that provides legal and regulatory information for tax professionals and their advisers.
(Tim Foley for the Center for Public Integrity)
A dense fog rolling in off the Pacific enveloped President Ronald Reagan’s majestic 688-acre ranch, high in the hills above Santa Barbara, California.
Visibility was limited, but a crowd of cameramen, photographers and reporters were gathered on that day in 1981 to record the president signing a major piece of legislation.
Wearing jeans, a faded dungaree jacket and cowboy boots, Reagan strolled out of the adobe farmhouse where he and first lady Nancy Reagan were vacationing to a table on the gravel driveway below the house. As he slid into an old leather chair, Reagan flashed his radiant smile to the journalists awaiting the ceremony.
He had much to smile about. Stacked on the table was ERTA, the 185-page Economic Recovery Tax Act of 1981, whose passage fulfilled a campaign promise to cut taxes in a big way.
Signing the bill repudiated everything he had once believed in as a New Deal supporter. ERTA slashed personal, corporate and estate taxes and was stuffed with other tax favors for high-net-worth individuals and corporations. The tax cuts carved a $750 billion hole in the federal budget, prompted cuts in multiple public programs and added to the deficit. The cuts, spread over six years, totaled $2.4 trillion in today’s dollars — basically the cost of the Biden administration’s multi-year, scaled-down Build Back Better bill that never made it out of Congress.
But that was just the beginning. The bill signing on that foggy day set in motion a trend in tax policy that is supercharging America’s escalating income inequality. In the past four decades, Congress after Congress has cut taxes on the richest people and corporations — billions of dollars that would otherwise have gone to the federal till for spending that could help the rest of the public get ahead.
Along the way there were some tax increases, most recently the Inflation Reduction Act signed by President Joe Biden in August that levied a 15% minimum tax on corporations and a 1% excise tax on stock repurchases by public companies. That law was a modest but significant breakthrough for the Democrats after years of Republican-driven tax cuts.
To some, the value of the reforms isn’t just monetary: “They will help restore the public’s confidence in the fairness of our tax system,” said Frank Clemente, executive director of Americans for Tax Fairness, a coalition that advocates for progressive taxation.
These increases notwithstanding, the trajectory over the past two generations has been in the opposite direction.
In 1980, the top income tax rate for individuals was 70%. Today it’s 37%.
The political forces behind that seismic shift haven’t stopped pushing for more. Already, House Republicans are proposing to extend or make permanent some of the most recent tax cuts.
Setting the pattern
Before the income tax was enacted in 1913, average Americans paid the bulk of federal taxes through levies on imported goods. Democrats succeeded in passing the income tax as a way to compel the wealthy to pay more of the cost of running the national government.
Until World War II, the income tax was levied on only the richest Americans. Even after that, the system was designed so people with more money paid higher rates — much higher for the wealthiest.
Elected officials, largely Republicans with some assists from Democrats, have spent the past four decades pulling that system apart.
They’ve tucked large breaks for the rich into proposals with small cuts for millions of other Americans, effectively disguising the main beneficiaries. They’ve promoted tax cuts with claims about economic benefits that have not panned out.
Much more - https://publicintegrity.org/inequality-poverty-opportunity/taxes/unequal-burden/how-four-decades-of-tax-cuts-fueled-inequality/
It was Plato who said, “He, O men, is the wisest, who like Socrates, knows that his wisdom is in truth worth nothing”
Discover What Traders Are Watching
Explore small cap ideas before they hit the headlines.
