The Dangerous Reagan Cult

Economic Committee report April 2000

In 1981, newly elected President Ronald Reagan refocused fiscal policy on the long run. He proposed, and Congress passed, sharp cuts in marginal tax rates. The cuts increased incentives to work and stimulated growth. These were funda-mental policy changes that provided the foundation for the Great Expansion that began in December 1982.

Under President Reagan, federal revenues increased even with tax cuts, federal spending did not decrease, the country experienced the longest period of sustained growth during peacetime in its history, and the rich paid more taxes proportionately than they had before the tax cuts were implemented.

Total federal revenues doubled from just over $517 billion in 1980 to more than $1 trillion in 1990. In constant inflation-adjusted dollars, this was a 28 percent increase in revenue.

As a percentage of the gross domestic product (GDP), federal revenues declined only slightly from 18.9 percent in 1980 to 18 percent in 1990.

Revenues from individual income taxes climbed from just over $244 billion in 1980 to nearly $467 billion in 1990.5 In inflation-adjusted dollars, this amounts to a 25 percent increase.

This economic boom lasted 92 months without a recession, from November 1982 to July 1990, the longest period of sustained growth during peacetime and the second-longest period of sustained growth in U.S. history. The growth in the economy lasted more than twice as long as the average period of expansions since World War II.

In 1991, after the Reagan rate cuts were well in place, the top 1 percent of taxpayers in income paid 25 percent of all income taxes; the top 5 percent paid 43 percent; and the bottom 50 percent paid only 5 percent.

The proportion of total income taxes paid by the top 1 percent rose sharply under President Reagan, from 18 percent in 1981 to 28 percent in 1988.

Average effective income tax rates were cut even more for lower-income groups than for higher-income groups. While the average effective tax rate for the top 1 percent fell by 30 percent between 1980 and 1992, and by 35 percent for the top 20 percent of income earners, it fell by 44 percent for the second-highest quintile, 46 percent for the middle quintile, 64 percent for the second-lowest quintile, and 263 percent for the bottom quintile.

These reductions for the lowest-income groups were so large because President Reagan doubled the personal exemption, increased the standard deduction, and tripled the earned income tax credit (EITC), which provides net cash for single-parent families with children at the lowest income levels. These changes eliminated income tax liability altogether for over 4 million lower-income families.

if one counts the Social Security payroll tax, the share of total federal taxes increased between 1980 and 1989 for the following groups:

For the top 1 percent of taxpayers, from 12.9 percent in 1980 to 15.4 percent in 1989;

For the top 5 percent of taxpayers, from 27.3 percent in 1980 to 30.4 percent in 1989; and

For the top 20 percent of taxpayers, from 56.1 percent in 1980 to 58.6 percent in 1989.

as a european I believe, that its true, that you have Tea party in America because of Obama. yet it is only due to a false portraying of Obama as a politician. He is portrayed as radical leftist, a socialist, a troskyite. Its absolutely false. His problem is , that he is from mixed marriage, born in Hawaii, strong critic of Iraq war and not so much in touch with {for ex. } southern ordinary people as Clinton was, when he was elected. All in all, Obama is pretty good president. He must be careful not to pose as elitist and intellectual. when he keeps up his "elan" he is going to be elected second time.