Forty years of Republican tax cuts have served only to blow up the national debt and widen the inequality gap in the U.S., according to an analysis by economic development specialist Steven Strauss.
Strauss argued in a recent USA Today column that the GOP’s “Unquestioning and unsubstantiated belief in the magical power of tax cuts isn’t a viable economic policy” and must finally be abandoned.
Beginning in the 1980s under President Ronald Reagan, Republicans took hold to the notion that slashing taxes for the wealthiest Americans would “unleash the "makers" — incentivizing them to work harder and invest more, thereby trickling down to benefit ordinary Americans,” Strauss wrote.
Such tax cuts would pay for themselves, Republicans consistently argued, and result in an economic boom like the U.S. had never seen before.
But history offers a wildly different story — one in which most Americans saw little benefit and growth in gross domestic product slowed.
“From 1950 to 1980, the top federal marginal tax rates (the rates on income above certain levels) were as high as 92% and never below 70%,” Strauss noted. “Republicans have been slashing the top tax bracket for annual earned income since the early 1980s, and it is now 37% on income above $612,350.”
What’s more, in 2003 Republicans “shrank the tax rate on unearned income (such as dividends) to 15%, resulting (for example) in the billionaire Warren Buffett having a lower tax rate than his secretary.”
But the promised economic boom never came to be.
Average annual growth in real inflation-adjusted gross domestic product from 1950 to 1980 was 3.9 percent, Strauss noted; by comparison, from 1980 to 2018, average growth shrank to 2.7 percent.
Likewise, Republicans’ insistence that wealth would “trickle down” to average Americans was way off the mark.
“[D]uring the high tax period, median household incomes increased on average (in real terms) by a bit over 2.5% per year. During the low income tax period, average real growth in household income declined to 0.7% per year,” Strauss wrote.
The professor said he is not advocating for bigger government; he is merely making a “plea for economic sanity.” Congress “must either raise enough money in taxes to pay for the programs it authorizes or reduce the size of government,” he said.
Strauss concludes: “Unquestioning and unsubstantiated belief in the magical power of tax cuts isn’t a viable economic policy. The GOP is putting America on an unsustainable path that is disastrous both for its fiscal future and for the hopes of people trying to get ahead.”