Rates on the very rich went back up into the 70-90% range from the 1930s to the 1980s. As a result, the economy grew steadily; for the first time in the history of our nation we went 50 years without a crash or major bank failure; and working people's wages increased enough to produce the strongest middle class this nation has ever seen.
Then came Reaganomics.
Reagan cut top marginal rates on millionaires and billionaires from 74% down to 38% and there was an immediate surge in the markets - followed by the worst crash since the Great Depression and the failure of virtually the entire nation's savings and loan banking system.
Bush I cut taxes, and the nation fell into a severe recession while debt soared and wages for working people fell.
Things stabilized somewhat when Clinton slightly raised taxes on the very rich, but W. Bush dropped them again - including taking taxes on unearned income (interest and dividends - the "income" that people like W. born with a trust fund "earn" as they sit around the pool waiting for the dividend check to arrive in the mail) down to a top rate of 15%. (That's right - trust fund babies like Bush and Scaife pay a MAXIMUM 15% federal income tax on their dividend and interest income, thanks to the second Bush tax cut.) The result of this surge in easy money for the wealthy, combined with deregulation in the financial markets, was the "froth" Greenspan worried about and led us straight into the Second Republican Great Depression, ongoing today.
The math is really pretty simple. When the uber-rich are heavily taxed, economies prosper and wages for working people steadily rise. When taxes are cut for the rich, working people suffer and economies turn into casinos.
Roll Back The Reagan Tax Cuts
While there's much discussion about letting the Bush tax cuts expire, if we really want our country to recover its financial footing we must do something altogether different. We need to roll back the Reagan tax cuts that took the top marginal rate from above 70% down into the 30% range.
First, though, we have to help Americans realize that "no new taxes" is a mantra that is meaningful to the very rich, but largely irrelevant to average working people.
Only when the current generation re-learns the economic and tax lessons well known by the generation (now dying off) that came of age in the 30s through the 60s, will this become politically possible. Americans need to learn what Europeans know about taxes - they only matter to the rich.
Thus today the uber-rich are spending hundreds of millions to make sure words like "burden" are always associated with the word "tax," and to convince average working people that they should throw out of office any politicians who are willing to raise taxes on the rich.
We have a lot of education to do...and as long as the Right Wing Machine of the uber-rich continues to "lose" (e.g. "invest") millions of dollars a year in their ongoing disinformation campaign, it's going to require all of us reciting the mantra, "Roll back the Reagan tax cuts!"
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