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Simplifying the tax code in the 80s was the public sales pitch. The real strategy was to dramatically cut taxes on the wealthy (e.g. by eliminating the top seve

Simplifying the tax code in the 80s was the public sales pitch. The real strategy was to dramatically cut taxes on the wealthy (e.g. by eliminating the top several marginal tax brackets). But keep in mind, the Democrats controlled congress, so reform had to gain bipartisan support.

twoodfin 8y ago
This chart doesn’t show evidence of a particularly dramatic cut in effective rates for the top 1% of earners: https://taxfoundation.org/taxes-rich-1950-not-high/ https://taxfoundation.org/taxes-rich-1950-not-high/
- jacobolus 8y ago
  The top 1% of earners today earn a dramatically larger share of total income than the top 1% in the 1950s. If taxes kept up, they would have noticeably higher effective tax rates than they used to have. P.S. The “Tax Foundation” is a right-wing “think tank” (i.e. activists masquerading as researchers) funded by billionaires and corporations. I would however recommend reading the whole paper they cite, http://gabriel-zucman.eu/files/PSZ2017.pdf http://gabriel-zucman.eu/files/PSZ2017.pdf > Government redistribution made growth more equitable, but only slightly so. After taxes and transfers, income in the bottom quintile stagnated (+4%) over the 1980–2014 period while it grew a meager 21% for the bottom 50% as a whole. That is, transfers erased about a third of the gap between macroeconomic growth (61%) and growth for the bottom half of the distribution (+1% before government intervention). Taxes did not hamper the upsurge of income at the top, which grew almost as much as pre-tax. > The top panel of Figure II provides a granular view of who benefitted (or not) from growth, by showing the annualized real growth of pre-tax and post-tax income for each percentile of the distribution over the 1980–2014 period, with a zoom within the top 1%. There are two striking results. First, the vast majority of the population—from the bottom up to the 87th percentile—experienced less growth than the (modest) macro rate of 1.4% a year. For instance, the 10th percentile declined by 0.6% a year pre-tax (+0.3% post-tax); the 30th percentile stagnated pre-tax and grew 0.6% post-tax; the 80th percentile grew 1.2% pre-tax (+1.3% post-tax). Only the top 12 percentiles of the population achieved a growth rate as high or higher than the macro rate of 1.4%. Second, even percentiles 88 to 98 experienced unimpressive income gains, between 1.4% and 2.2% a year—in most cases less than the macro growth rate of U.S. incomes for the preceding generation, from 1946 to 1980. The only group that grew fast is the top 1%, whose average income increased 3.3% pre-tax and 3.2% post-tax, with growth culminating at +6.0% a year for the top 0.001%. The top 1% has pulled apart from the rest of the economy—not the top 20%. etc.
hnmullany 8y ago
No-one paid the top brackets because the tax code at that point was riddled with ways to generate tax losses that reduced liability. The tax reform really was a good thing (unlike 90% of what happened under the Reagan administration) https://en.wikipedia.org/wiki/Tax_Reform_Act_of_1986#Passive_losses_and_tax_shelters https://en.wikipedia.org/wiki/Tax_Reform_Act_of_1986#Passive...
- llukas 8y ago
  There is openly available IRS data on how many households actually paid highest bracket. You are wrong that nobody paid it.

twoodfin 8y ago

This chart doesn’t show evidence of a particularly dramatic cut in effective rates for the top 1% of earners: https://taxfoundation.org/taxes-rich-1950-not-high/ https://taxfoundation.org/taxes-rich-1950-not-high/

jacobolus 8y ago
The top 1% of earners today earn a dramatically larger share of total income than the top 1% in the 1950s. If taxes kept up, they would have noticeably higher effective tax rates than they used to have. P.S. The “Tax Foundation” is a right-wing “think tank” (i.e. activists masquerading as researchers) funded by billionaires and corporations. I would however recommend reading the whole paper they cite, http://gabriel-zucman.eu/files/PSZ2017.pdf http://gabriel-zucman.eu/files/PSZ2017.pdf > Government redistribution made growth more equitable, but only slightly so. After taxes and transfers, income in the bottom quintile stagnated (+4%) over the 1980–2014 period while it grew a meager 21% for the bottom 50% as a whole. That is, transfers erased about a third of the gap between macroeconomic growth (61%) and growth for the bottom half of the distribution (+1% before government intervention). Taxes did not hamper the upsurge of income at the top, which grew almost as much as pre-tax. > The top panel of Figure II provides a granular view of who benefitted (or not) from growth, by showing the annualized real growth of pre-tax and post-tax income for each percentile of the distribution over the 1980–2014 period, with a zoom within the top 1%. There are two striking results. First, the vast majority of the population—from the bottom up to the 87th percentile—experienced less growth than the (modest) macro rate of 1.4% a year. For instance, the 10th percentile declined by 0.6% a year pre-tax (+0.3% post-tax); the 30th percentile stagnated pre-tax and grew 0.6% post-tax; the 80th percentile grew 1.2% pre-tax (+1.3% post-tax). Only the top 12 percentiles of the population achieved a growth rate as high or higher than the macro rate of 1.4%. Second, even percentiles 88 to 98 experienced unimpressive income gains, between 1.4% and 2.2% a year—in most cases less than the macro growth rate of U.S. incomes for the preceding generation, from 1946 to 1980. The only group that grew fast is the top 1%, whose average income increased 3.3% pre-tax and 3.2% post-tax, with growth culminating at +6.0% a year for the top 0.001%. The top 1% has pulled apart from the rest of the economy—not the top 20%. etc.

hnmullany 8y ago

No-one paid the top brackets because the tax code at that point was riddled with ways to generate tax losses that reduced liability. The tax reform really was a good thing (unlike 90% of what happened under the Reagan administration) https://en.wikipedia.org/wiki/Tax_Reform_Act_of_1986#Passive_losses_and_tax_shelters https://en.wikipedia.org/wiki/Tax_Reform_Act_of_1986#Passive...

llukas 8y ago
There is openly available IRS data on how many households actually paid highest bracket. You are wrong that nobody paid it.