Commentary
Ronald Reagan’s Legacy to America: Massive Wealth Gaps
By David Demers*
Seventy-seven-year-old President Ronald Reagan warmed up his audience with a joke about his age and Christopher Columbus.
"When Columbus discovered America, I can't believe that he got as warm a reception as you've given me. And I doubt there was a delicious plate of baked ziti waiting for him, either. Now, contrary to what you may have heard, however, I was not with Columbus on that trip."
The congenial audience roared.
It was Columbus Day, October 12, 1988 — a time before historians reframed Columbus as a greedy villain who enslaved new world natives.
Reagan was speaking in West Orange, New Jersey, before the Italian-Americans of Essex County, who claim Columbus was an Italian. But at that Republican fund-raiser, Reagan had a lot more to say about the Democrats than Columbus.
"[I]n Washington, the liberals already are saying they want to raise taxes, and they have all kinds of inflationary spending programs in the works. Well, I think the people of New Jersey know what to do with tax-and-spend liberals. All you need to do is just walk into the polling booth, put your hand on the lever, and say ‘read my lips: no new taxes!'"
In his speech, Reagan took credit for reducing unemployment, inflation, interest rates, and taxes. But he failed to mention two crucial consequences of his decisions.
The first was that his tax cuts created a $1.6 trillion debt — the largest peacetime increase in history and one that he never repaid. Second, the tax cuts did little to boost the incomes of the middle-class members of the audience. Instead, they created conditions for a massive windfall for the wealthy that continues to this day.
Shortly after being elected in 1980, Reagan introduced The Economic Recovery Tax Act of 1981, which cut earned income taxes and the capital gains rate for wealthy.
The top bracket for earned income taxes was lowered from 70 percent to 50 percent for taxpayers earning more than $136,000 (today's dollars), and the top capital gains rate was cut from 28 percent to 20 percent.
The top 1 percent benefited most from the 40 percent cut in capital gains taxes, because half of their income comes from capital gains and only 15 percent from earned income.
To justify these tax cuts, Reagan introduced a relatively new economic theory to the public: supply-side economics. This theory asserted that if the government lowered taxes, decreased regulation, and promoted free trade, the economy would grow and generate more tax revenue to make up for the tax cuts.
But that never happened.
In fact, just the opposite occurred.
Virtually all of the wealth created by tax cuts went to the wealthy, and the federal deficit ballooned 161 percent ($1.6 trillion) under Reagan, creating the highest relative increase ever posted by a non-wartime president.
Both Republican and Democratic legislators supported Reagan's tax cuts, even though Reagan's economic advisors pointed out beforehand that these cuts would increase the national debt. Reagan and legislators cut the maximum earned income tax rates again in 1987 and 1988, from 50 percent to 38.5 percent and then to 28 percent. The cuts reportedly deprived the U.S. treasury of $10 trillion in tax revenue.
During the Reagan years, the average wealth of the top 1 percent grew 58 percent, from $3,334,355 in 1981 to $5,252,353 in 1988 (2022 dollars). By the early 1990s, many members of Congress were crediting Reagan with giving the nation the greatest period of economic growth in history.
But country went into a recession and newly elected representative Bernie Sanders of Vermont set the record straight in terms of wealth. In a short one-minute speech he delivered on the House floor on July 24, 1991, Sanders pointed out that "the ‘80s was the decade in which the rich got richer and the poor got poorer while at the same time the rich paid less in taxes while the middle class and the working people of our country paid more in taxes."
By 2022, the average wealth of the top 1 percent had grown to $17,611,520, which was 1,317 times more than the assets of the bottom 50 percent. The gap between them was five times greater than it was in 1981. Taxes on the working and middle classes have increased 59 percent since the early 1950s, while taxes on billionaires have declined 67 percent and taxes on the top 10 percent have declined 17 percent.
The wealthiest 1 percent also have been accumulating assets at a much faster rate than the top 10 percent, who in turn have been gaining faster than the bottom 50 percent. The annualized (compounded, inflation-controlled) growth in wealth for the top 1 percent from 1986 to 2022 was 4.1 percent, compared with 3.4 percent for the top 10 percent, 2.4 percent for the 40 to 90 percent wealth category, and 3 percent for the bottom 50 percent.
The bottom line is that since the Reagan years the wealthy have been getting wealthier faster than the bottom 90 percent of Americans. The wealth gaps continue to grow even when tax cuts for the wealthy are not enacted. In fact, the national debt has increased under every president since Reagan, especially during the George W. Bush and Donald Trump presidencies when additional cuts in taxes produced more windfalls for the wealthy.
If taxes are not increased on the wealthy, my estimates predict America will have a major economic catastrophe within the next decade.
*Dr. David Demers is author of Falling Behind: Why Wealth Gaps Are Preventing You and Half of America from Getting Ahead, which will be published in 2025. He has written two dozen books and worked as a professor of communication and sociology at Washington State University before retiring to spend more time writing books. He lives in Phoenix.
Ronald Reagan’s Legacy to America: Massive Wealth Gaps
By David Demers*
Seventy-seven-year-old President Ronald Reagan warmed up his audience with a joke about his age and Christopher Columbus.
"When Columbus discovered America, I can't believe that he got as warm a reception as you've given me. And I doubt there was a delicious plate of baked ziti waiting for him, either. Now, contrary to what you may have heard, however, I was not with Columbus on that trip."
The congenial audience roared.
It was Columbus Day, October 12, 1988 — a time before historians reframed Columbus as a greedy villain who enslaved new world natives.
Reagan was speaking in West Orange, New Jersey, before the Italian-Americans of Essex County, who claim Columbus was an Italian. But at that Republican fund-raiser, Reagan had a lot more to say about the Democrats than Columbus.
"[I]n Washington, the liberals already are saying they want to raise taxes, and they have all kinds of inflationary spending programs in the works. Well, I think the people of New Jersey know what to do with tax-and-spend liberals. All you need to do is just walk into the polling booth, put your hand on the lever, and say ‘read my lips: no new taxes!'"
In his speech, Reagan took credit for reducing unemployment, inflation, interest rates, and taxes. But he failed to mention two crucial consequences of his decisions.
The first was that his tax cuts created a $1.6 trillion debt — the largest peacetime increase in history and one that he never repaid. Second, the tax cuts did little to boost the incomes of the middle-class members of the audience. Instead, they created conditions for a massive windfall for the wealthy that continues to this day.
Shortly after being elected in 1980, Reagan introduced The Economic Recovery Tax Act of 1981, which cut earned income taxes and the capital gains rate for wealthy.
The top bracket for earned income taxes was lowered from 70 percent to 50 percent for taxpayers earning more than $136,000 (today's dollars), and the top capital gains rate was cut from 28 percent to 20 percent.
The top 1 percent benefited most from the 40 percent cut in capital gains taxes, because half of their income comes from capital gains and only 15 percent from earned income.
To justify these tax cuts, Reagan introduced a relatively new economic theory to the public: supply-side economics. This theory asserted that if the government lowered taxes, decreased regulation, and promoted free trade, the economy would grow and generate more tax revenue to make up for the tax cuts.
But that never happened.
In fact, just the opposite occurred.
Virtually all of the wealth created by tax cuts went to the wealthy, and the federal deficit ballooned 161 percent ($1.6 trillion) under Reagan, creating the highest relative increase ever posted by a non-wartime president.
Both Republican and Democratic legislators supported Reagan's tax cuts, even though Reagan's economic advisors pointed out beforehand that these cuts would increase the national debt. Reagan and legislators cut the maximum earned income tax rates again in 1987 and 1988, from 50 percent to 38.5 percent and then to 28 percent. The cuts reportedly deprived the U.S. treasury of $10 trillion in tax revenue.
During the Reagan years, the average wealth of the top 1 percent grew 58 percent, from $3,334,355 in 1981 to $5,252,353 in 1988 (2022 dollars). By the early 1990s, many members of Congress were crediting Reagan with giving the nation the greatest period of economic growth in history.
But country went into a recession and newly elected representative Bernie Sanders of Vermont set the record straight in terms of wealth. In a short one-minute speech he delivered on the House floor on July 24, 1991, Sanders pointed out that "the ‘80s was the decade in which the rich got richer and the poor got poorer while at the same time the rich paid less in taxes while the middle class and the working people of our country paid more in taxes."
By 2022, the average wealth of the top 1 percent had grown to $17,611,520, which was 1,317 times more than the assets of the bottom 50 percent. The gap between them was five times greater than it was in 1981. Taxes on the working and middle classes have increased 59 percent since the early 1950s, while taxes on billionaires have declined 67 percent and taxes on the top 10 percent have declined 17 percent.
The wealthiest 1 percent also have been accumulating assets at a much faster rate than the top 10 percent, who in turn have been gaining faster than the bottom 50 percent. The annualized (compounded, inflation-controlled) growth in wealth for the top 1 percent from 1986 to 2022 was 4.1 percent, compared with 3.4 percent for the top 10 percent, 2.4 percent for the 40 to 90 percent wealth category, and 3 percent for the bottom 50 percent.
The bottom line is that since the Reagan years the wealthy have been getting wealthier faster than the bottom 90 percent of Americans. The wealth gaps continue to grow even when tax cuts for the wealthy are not enacted. In fact, the national debt has increased under every president since Reagan, especially during the George W. Bush and Donald Trump presidencies when additional cuts in taxes produced more windfalls for the wealthy.
If taxes are not increased on the wealthy, my estimates predict America will have a major economic catastrophe within the next decade.
*Dr. David Demers is author of Falling Behind: Why Wealth Gaps Are Preventing You and Half of America from Getting Ahead, which will be published in 2025. He has written two dozen books and worked as a professor of communication and sociology at Washington State University before retiring to spend more time writing books. He lives in Phoenix.