Tuesday, December 26, 2017
For all the backslapping over a job well done, however, Republicans are proving notably more reluctant to acknowledge the true impact of the tax changes that Reagan wrought. That's because Reagan's cuts didn't quite work as advertised. Gross domestic product grew quickly during his two terms, averaging about 3.5 percent a year, pretty decent compared with the current measly pace. For one in two Americans, though -- those in the bottom half of the income pile -- income actually shrank on Reagan's watch. In 1980, the year he was elected, they earned $16,371 a year on average, in today's dollars, according to the World Wealth and Income Database. By 1988, Reagan's last year in office, they had to make do with $16,268.
Reagan promised to "continue to fulfill the obligations that spring from our national conscience," to help those who legitimately could not help themselves. But even throwing in the impact of taxes and transfers from all government programs, Americans on the bottom half of the income scale did not fare much better. By 1988, they were taking in $21,614, on average, $8 more than in 1980, after inflation.
The sliver of America that did get ahead was, you guessed it, the one at the tippy top: the richest Americans, those in the highest 1 percent of the income distribution. Their earnings grew by about 6 percent a year.
During Mr. Bush's two terms, and tax cuts, the average income of the bottom half of Americans slid from $17,827 to $17,473, accounting for inflation. After factoring in taxes and transfers, that sum did increase -- 3.5 percent, or about 0.4 percent a year.
The bottom half of Americans fared better under President Bill Clinton, who actually raised taxes. On average, their incomes rose by a fifth over his two terms, after taxes and transfers, a gain of over 2 percent per year, after accounting for inflation. Their lot also improved during President Barack Obama's administration, census data shows. (The series from the World Wealth and Income Database ends in 2014.)
In 2014, the economy was 2.5 times larger than it was in 1980, but the bottom half of the population made only 21 percent more, on average, even after including government benefits. America's middle -- families earning more than the bottom 30 percent but less than the top 30 percent -- gained only 50 percent in those 34 years. By contrast, the after-tax incomes of Americans in the top 1 percent -- families like President Trump's or Senator Bob Corker's -- tripled.
That is less surprising when one realizes that for all the stories about harried workers in the Midwest shouldering an unbearable tax burden, tax relief since Reagan's fateful State of the Union speech has mostly been aimed at benefiting the well-to-do: The average tax rate for Americans in the bottom half of the income pile was higher in 2014 than it was in 1980. The rate at the top declined.
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