March 28, 2024
BANGOR DAILY NEWS (BANGOR, MAINE

The rich get richer, and the poor…

I suggest that the author of a recent Bangor Daily News guest column (“Wealthy discriminated against,” Dec. 7) examine Kevin Phillips’ impressive new book, “The Politics of Rich and Poor,” which clearly documents the reverse Robin Hood economics of the Reagan era. Phillips, a former Republican political strategist who experienced a change of heart after analyzing the impact of his party’s programs in the 1980s, has established that a major transfer of wealth took place in the United States over the past 10 years from low- and middle- to upper-income groups and that federal tax policy was a significant contributing factor.

As Phillips demonstrates, Americans in all income categories over $100,000 saw their wealth increase dramatically during the recent decade, while those earning less than $50,000 saw their annual incomes shrink in constant dollars. The biggest losers were families making less than $30,000 a year, whose real incomes declined from 5 to 15 percent betweeen 1977 and 1988. Meanwhile, millionaries were being created at a record pace, their number tripling from 600,000 in 1981 to 1.5 million in 1988, and an entirely new category of citizen, the billionaire, came into being.

It is true that the wealthiest Americans (the top 5 percent) saw their combined share of the total national income taxes collected increase by about 10 percent during the Reagan tenure, but only because their incomes also rose by anywhere from 25 to 50 percent — a result of capital gains tax cuts, increasingly beneficial tax treatment of unearned income (rents, interest, dividends), climbing interest rates, and the booming stock market. If a person’s wealth grows substantially, his income taxes will invariably rise as well, even if his actual tax rate has been cut. That is exactly what happened in the 1980s.

The bulk share of taxes paid by the rich as a class at the end of the 1980s did not translate into an increased economic burden. They simply paid a slightly bigger piece of their vastly increased money pie. Conversely, the fact that poorer Americans paid a smaller combined portion of total income taxes did not represent a decreased economic burden. Those who lost their jobs in the dislocations of the 1980s paid no taxes at all during that time — hardly a blessing. Similarly, those to whom Reagan prosperity meant exchanging a highly skilled blue-collar job at good pay for a service-sector job at slightly above minimum wage also paid lower lower income taxes, but one would be hard-pressed to characterize them as beneficiaries of the system.

Congressional Budget Office figures cited by Kevin Phillips show that if all federal taxes are added to the mix, including regressive Social Security taxes, the bottom half of American families in income (those earning less than $30,000 a year) actually paid a higher effective rate of taxation in 1988 than in the late 1970s. More affluent middle-class families (those earning more than $30,000 but less than $100,000) managed to hold their own during that period, paying about the same rate. However, families above the $100,000 income level — particularly those in the over-$250,000 category — experienced a substantial effective tax cut during the Reagan years that amounted to thousands of dollars per household. Let’s not pity the wealthy.

I agree with the suggested proposition that we should look to the ideals and ideas of the Founding Fathers in formulating public policy, and it was Thomas Jefferson himself who warned “an aristocracy of wealth is of more harm and danger than of benefit to society.” His words are as relevant today as they were 200 years ago. In the 1980s, America created just such an aristocracy.

Wayne M. O’Leary is a resident of Orono.


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