President Reagan had the right idea to lower personal income tax rates. However, too much of a good thing is not necessarily good.
By the end of the Reagan presidency
, personal income tax rates were lower than that of corporate rates at all levels of net income. This differential precipitated a decline in domestic private investment
relative to gross domestic product. As a result, employment and incomes for much of America stagnated during the past 30 years.
Welfare for the wealthy
has largely been responsible for an unprecedented level of income and wealth disparities, where the top 1 percent own approximately 35 percent of all net worth and the top 10 percent own more than 80 percent of U.S.-owned equities.
The dichotomy has been exacerbated by high unemployment, reducing labor bargaining power while increasing corporate earnings. "Corporate earnings now represent the largest share of the GDP — and wages the smallest share of GDP — than at any time since records have been kept. Hence, the Great Redistribution," says former Clinton Labor Secretary Robert Reich.
Favorable tax treatment of capital gains, dividends and debt enable the wealthy to pay an average income tax rate of roughly12 percent, less than half that of most workers. When payroll taxes are included, the tax rate for the average worker is nearly three times that of the wealthy.
Jonah Goldberg, a fellow at the American Enterprise Institute, is correct to say, "Family structure and the values that go into successful child rearing have a stronger correlation with economic mobility than income inequality."
However, in parallel with positive parenting, a more equal economic playing field would generate systemic synergies that serve society better.
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