Unequal Taxing In The United States

Unequal Taxing

The United States of America is one of the richest countries in the world. In fact, we rank 9th in gross domestic output (Atlas), yet this is also the same country where too many working parents have to go without meals so that their children can eat, and families are often left deciding which bill they can actually afford to pay this month. With that being said, as a country, we also have some of the highest rates of income inequality of comparable developed nations (Radius TWC). It’s not that people are working less, on the contrary, Americans are now working twice as hard as previous generations, yet they are getting nowhere (Kornbluth). Income inequality does not just harm one person; income inequality hurts the entire

Many argue that the issue of severely unequal taxation began with the Reagan administration in the 80s. Prior to Reagan’s shift to more conservative economic policies, the wealthiest percentage of Americans were taxed at an average rate of about 91% (Americans for Tax Fairness). As a result, the economy was able to maintain the economic boom following World War 2 up until the early 70s. However, after Reagan changed policies, the tax rate for the wealthy dropped from 74% to 38%. Unsurprisingly, following a surge in the markets, the economy suffered its most severe recession since the great depression under “Reaganomics” due to the severe cut in taxation in favor of the

Consequently, limiting the spending capacity of the middle class damages the entire economy because it is the middle class that generates the most economic activity. For example, one wealthy person does not need to buy 5,000 new cars, but 5,000 families could certainly aid in stabilizing the auto-industry. Simply put, the extremely rich do not spend enough of their money to sustain an entire economic system. Unfortunately, the trend of lowering taxes for the rich continued under the next presidencies. Interestingly, under the Clinton administration, taxes on the rich were raised, and as a result, we saw the economy stabilize (Hartmann). However, under George Bush Jr., taxes on the rich were once again lowered. This time around, unearned income was now greatly untaxed as well. Lower taxes on unearned income is what enabled billionaires to only pay a 15% tax rate on federal taxes compared to the average American who could pay as much as 30%. Ergo, this cut in taxes led to yet another recession in 2008. Through these trends, we see that when the rich are paying their appropriate shares inequality due to recessions, for example, are generally at their