Arnie, I know you mean well, but you're resolutely refusing to recognize that my post deals with tax rate compression and its consequences. You yourself provided the data and an explanation for the features of the '86 act that garnered support from both sides. Obviously, at the time, not enough concern was raised regarding possible long-term undesirable effects of "de-emphasis on adjusting the tax's distribution by income class.", i.e. rate compression.
I did not state which specific Reagan tax cuts I was referring too, but when I mentioned that he raised the rate on the lowest bracket, from the data you provided you could, of course, tell that it was the 1986 act that did that. Does it really matter to you which specific Reagan period Tax act raised the rates on the low brackets? What is important is that it happened and the ultimate effect was rather profound.
The main point of my post was that during the Reagan presidency what we could call "the great rate compression" began. And the cuts resulting from the 1981 and the 1986 acts both resulted in rate compression. This has been somewhat undone since of course. Even after partially undoing the rate compression of the Reagan era, however, we still have not recovered anything like the progressiveness of the income tax rate structure prior to Reagan.
I just now found this quote in the Wiki article on Reaganomics: I think you, and especially Jem, will find it enlightening.
"With the Tax Reform Act of 1986, Reagan and Congress sought to raise taxes on lower incomes, eliminate many deductions, and reduce the highest marginal rates. In 1983, Democrats Bill Bradley and Dick Gephardt had offered a proposal; in 1984 Reagan had the Treasury Department produce its own plan. The eventual bipartisan 1986 act aimed to be revenue-neutral: while it reduced the top marginal rate, it also cleaned up the tax base by removing certain tax write-offs, preferences, and exceptions, thus raising the effective tax on activities previously specially favored by the code. Ultimately, the combination of the increase in tax rates on lower incomes and decrease in deductions raised revenue equal to about 4% of existing tax revenue." [underlining is mine.]
But this is a side track from what I have pointed out to you, namely that there was a great compression of brackets during the Reagan Presidency, and it has remained, in part, ever since. .
I think I made it quite clear that to blame Reagan for this is misguided. In fact democrats also bought into the supply-side economics of the time. The supply siders held sway until there was enough data to make it clear that the results were not as had been anticipated. We found that we were not on the down slope of the Laffer curve, as Laffer had suggested to Cheney and Rumsfeld, who ran breathlessly back to Washington to spread the news that tax cuts will pay for themselves. It's win win!
We're past that now. We know the supply-siders were wrong, but the damage done by rate compression remains to this very day. Even though top marginal rate have gone back up some since the Reagan era, they still remain lower than at any time since 1930! By no means have we put back all the progressiveness that once existed in the U.S. tax structure.
Obviously the the upper income brackets can take far more advantage than lower income brackets of various deductions and loopholes to reduce their tax burden. The effect of these loopholes is equivalent to rates even more compressed than shown in the tables. The tables tell you all you need to know about how tax rate tampering during Reaganomics, in the interest of "fairness" and "revenue neutrality" squeezed the lower middle class while benefiting high income earners. The family vacation enjoyed by the lower middle class during the Eisenhower era, a period of steeply progressive tax rates, was soon to become an endangered species by the end of the Reagan Presidency.
By the way, Arnie, the 1986 act lowered over two years, rather than one, the top marginal rate by a little more than the 1981 cuts.
I have been puzzled by why a flat tax is more fair than a progressive one, since in both a flat and progressive tax structure we pay exactly the same tax rate on the same dollars earned. For example. If I make 25K and a Billionaire makes 1 billion we both pay exactly the same rate on 25K. It is just that Billionaire also makes dollars that fall in other brackets as well, and he pays a different rate in those brackets. I'd pay exactly the same rate as he if I made dollars that fell in those other brackets. What is unfair about that?
So, in my mind it isn't a matter of fairness, it's a matter of which tax structure produces the most stable and strongest economy in the long run. Is it the one that produces less disparity in net income after taxes, or the one that produces more disparity? You can argue until you're blue in the face, but you'll never convince me that the way to provide opportunity for the middle class to move up the economic ladder is to make the wealthy wealthier. I don't care if the wealthy get even wealthier, that's fine with me. I'm concerned about the increasing difficulty for middle class citizens, especially the lower middle class, to move up the economic ladder. Don't tell me that the way to improve opportunity for the lower classes is through making the upper classes wealthier. That's nonsense!
