Ian MacIsaac: Still living in Reaganland: The Decline of the middle class through tax rates

  The government long ago declared the end of the recession, but most Americans aren't doing much better than they were two years ago.

  A new piece in this week's issue of reliably muckraking newsmagazine The Atlantic helps explain just what's going on, in an article entitled “Squeezed Dry: Why Americans Work So Hard but Feel So Poor.”

  "Since the recovery began,” author Derek Thompson explains, “corporate profits have captured nearly 90 percent of the growth in real income. Wages and salaries have accounted for 1 percent."

  The article goes on to note that in the past thirty years--since Ronald Reagan took office and enacted the historic 1981 tax cut that lowered the top tax rates from nearly 70% to below 30%—worker productivity has increased at seven times the rate of workers' wages.

  Americans are being worked harder and harder, but they are not reaping the benefits. The folks at the top are. American income inequality has gotten to the point where the top 1% of Americans—a scant three million of us—have more money than the bottom 150 million Americans. One percent of the country is richer than half the country.

  It says something that the last time richest among us had this large a share of the wealth—and indeed, the last time the top 1% paid this little to the government was during the Roaring Twenties, the waning days of the robber baron era. Hardly an era to replicate for 21st century economic success.

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  But history can also teach us about when things were different. During the 1950s and 1960s, the top 1% claimed barely 10% of the national income, as opposed to today’s 50%; the top tax bracket hovered around 90% (as opposed to today’s 28%) through most of the Truman, Eisenhower, Kennedy, and Johnson administrations. (And what a bunch of flaming socialists they all were!)

  Those also happened to be the boom years for America, the postwar-Cold War peak of innovation, excellence, investment, and international strength.

  America was strongest when gains in profit were distributed among the workers, not solely among the board of directors and the suits on the top floor. But that's what's happening now. How else did that tiny sliver of the American population come to usurp such a huge slice of the economic pie for themselves since Reagan took office apart from taking it from the blue-collar folks who the CEOs forced to work for declining wages?

  It's no coincidence that the Reagan era, the 1980s, was also the era of American outsourcing of manufacturing jobs.

  Contrary to his fake and contrived positive economic image, it was under Reagan that the last railroads left Montgomery, Ala.; that the last steel mills left Pittsburgh and Gary, Ind.; it was when the Big Three automakers shut down their economically vital manufacturing plants across Michigan.

  All those jobs went overseas. The bottom 50% lost the best jobs they had a chance of getting in America. But the suits at the top of companies like General Motors and Chrysler were able to greatly increase their bottom line by moving their factories to developing countries.

  In many cases, the actions taken by these companies in moving assets overseas would not have been legal until legislation passed in the 1980s changed the laws concerning regulation of American corporations.

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  In 1981, the top one percent's tax rate went from almost 70% to below 30%. It has never gone above 30% again. Not under Clinton; not under Obama. No president, liberal or conservative, has even attempted to raise it to half of what it was under conservative presidents like Nixon and Eisenhower. Somehow, in the past 30 years, it has become a political third rail to propose the historically obvious as it comes to tax policy.

  Recently, billionaire Warren Buffett sent out a challenge to his American peers on the Fortune 500 list of richest people in the world. He would award money to the charity of the billionaire's choice if any of them could show that they paid more in taxes than their secretary did.

  If I recall correctly, only two out of nearly 350 American billionaires stepped up. It may have been none.


  It is a sad America where our billionaires have a lower tax rate than the middle-class mothers who push paper for them. But that is the political reality now.

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  The media has made a lot out of Obama's current push to raise the top tax rates as part of a plan to cut the deficit. But even if he did raise their taxes: the richest Americans still would not pay close to half of what they paid when this country was at its peak. And people like my family will still end up paying a bigger share of our five-figure incomes to the government than the rich will pay of their eight- to -eleven figure incomes.

  And the richest among us will make sure of that. Indeed, it was their lobbying of hacks like Justice Clarence Thomas that influenced the Supreme Court's 'Citizens United' decision last year which erased a century of regulatory law concerning corporate donations to political campaigns.

  Why do you think the Republicans were so successful in confusing Americans about health care? Why do they think they made such gains in the 2010 congressional and gubernatorial elections? It had something to do with the sheer size of the tidal wave of money the top 1% were able to shower upon them. People like the Koch brothers, AT&T, and Wal-Mart, who all lobby Congress and who all, not coincidentally, benefited from recent Supreme Court decisions.

  The United States has evidently forgotten its economic history. What a shame it is.

  About the author: Ian MacIsaac is a staff writer for the Capital City Free Press. He is a history major at Auburn University Montgomery in Montgomery, Alabama and former co-editor of the school newspaper, the AUMnibus.

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