Reagan tax cuts
The phrase Reagan tax cuts refers to changes to the United States federal tax code passed during the presidency of Ronald Reagan. There were two major tax cuts: The Economic Recovery Tax Act of 1981 and the Tax Reform Act of 1986. The tax cuts popularized the now infamous phrase "trickle-down economics" as it was primarily used as a moniker by opponents of the bill in order to degrade supply-side economics, the driving principle used to promote the tax cuts.
- The first tax cut (Economic Recovery Tax Act of 1981) among other things, cut the highest personal income tax rate from 70% to 50% and the lowest from 14% to 11% and decreased the highest capital gains tax rate from 28% to 20%.[1]
- The second tax cut (personal income tax rate from 50% to 38.5% but decreasing to 28% in the following years[2] and increased the highest capital gains tax rate from 20% to 28%.[1]
At the time, people weren't substantially informed about the tax cuts, as an ABC News Poll in September 1986 showed that 63% of Americans didn't know enough about the Tax Reform Act of 1986 to say if it was good or bad.[3]
Historical tax rates
The top marginal income tax rate, that is, the rate paid on the 'last dollar' of the highest earner's income, was increased to 77% on the 2 millionth dollar earned during and to help finance the cost of fighting
Economic implications
Economic gains
- Unemployment fell from 7.5% in 1981 to 5.4% in 1989 after peaking at 10.8% in 1982.[7]
- Inflation fell from 11.8% when Reagan entered office to 4.7% when he left.[8]
- The US Average Real Income grew by 16.8% from 1980 to 1989.[9]
Economic costs
- The US Federal Tax Revenue as % of the GDP decreased from 18.5 to 17.4 from 1980 to 1990.[10]
- The budget deficit increased from $74 billion in 1980 to $221 billion in 1990.[10]
- The budget deficit as a % of GDP increased from 2.6% in 1980 to 2.7% in 1989.
- The national debt as a percentage of GDP increased by 62% from 30.9% in 1981 when Reagan took office to 49.9% when he left.[11]
- Median real wages dropped by 0.6% by 1990, as compared with 1980.[12]
Tax incentives post-tax cut
After the
See also
- Reaganomics
- Bush tax cuts
- Taxation history of the United States
References
- ^ a b Arthur Laffer (June 1, 2004). "The Laffer Curve: Past, Present, and Future". Retrieved June 21, 2019.
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(help) - ^ Legisworks - Retrieved 28 May 2019
- ^ Tom Kertscher (December 18, 2017). "Paul Ryan claims 1986 tax reform, like the current one, had low public support just before passage". Retrieved May 28, 2019.
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(help) - ^ "Historical Highest Marginal Income Tax Rates". Retrieved 2022-01-18.
- ^ "Party divisions of United States Congresses". Retrieved 2022-01-18.
- ^ "Historical U.S. Federal Individual Income Tax Rates & Brackets, 1862-2021". Retrieved 2022-01-18.
- ^ BLS: US Unemployment Rate - Retrieved 28 May 2019
- ^ Historical Inflation Rates - Retrieved 21 June 2019
- ^ US Average Real Income - Retrieved 15 Aug 2022
- ^ a b CBO "Historical Budget Data" - Retrieved 28 May 2019
- ^ "Federal Debt: Total Public Debt as Percent of Gross Domestic Product - Retrieved 18 September 2022
- ^ [https://fred.stlouisfed.org/series/LES1252881600Q "Employed full time: Median usual weekly real earnings: Wage and salary workers: 16 years and over" Retrieved 18 September 2022>
- ^ Kessler, Glenn (10 April 2015). "Rand Paul's claim that Reagan's tax cuts produced 'more revenue' and 'tens of millions of jobs'". Washington Post. Retrieved 16 October 2015.
External links
Further reading
- Monica Prasad, "The popular origins of neoliberalism in the Reagan tax cut of 1981." Journal of Policy History 24.3 (2012): 351–383.