You can see this trend today in America. When we had heavily regulated and taxed capitalism in the post-war era, the largest employer in America was General Motors, and they paid working people what would be, in today’s dollars, about $50 an hour with benefits. Reagan began deregulating and cutting taxes on capitalism in 1981, and today, with more classical “raw capitalism,” what we call “Reaganomics,” or “supply side economics,” our nation’s largest employer is WalMart and they pay around $10 an hour. This is how quickly capitalism reorients itself when the brakes of regulation and taxes are removed – this huge change was done in less than 35 years. This is the main reason why, when GM was our largest employer and our working class were also in the middle class, CEOs only took home 30 times what working people did. The top tax rate for all the time America’s middle class was created was between 74 and 91 percent. Until, of course, Reagan dropped it to 28 percent and working people moved from the middle class to becoming the working poor. Other policies, like protective tariffs and strong labor laws also help build a middle class, but progressive taxation is the most important because it is the most direct way to transfer money from the rich to the working poor, and to create a disincentive to theft or monopoly by those at the top. History shows how important high taxes on the rich are for creating a strong middle class. If you compare a chart showing the historical top income tax rate over the course of the twentieth century with a chart of income inequality in the United States over roughly the same time period, you’ll see that the period with the highest taxes on the rich – the period between the Roosevelt and Reagan administrations – was also the period with the lowest levels of economic inequality. You’ll also notice that since marginal tax rates started to plummet during the Reagan years, income inequality has skyrocketed. Even more striking, during those same 33 years since Reagan took office and started cutting taxes on the rich, income levels for the top 1 percent have ballooned while income levels for everyone else have stayed pretty much flat.
Posted on: Sat, 19 Apr 2014 23:07:18 +0000
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