September 14, 2011 By Robert Sobel
The growing gap between the rich and poor in the United States has widened over the last three decades. The once proud and strong middle class has deteriorated over time and things need to drastically change if America wants to get back to the “good old days”.
When Ronald Reagan was elected president, he started the United States on a path of economical and social destruction. In his first four years in office, from 1980 to 1984, Reagan lowered the top income tax bracket from 70% to 50%. In the next four years, Reagan took the top bracket from 50% down to a dangerously low 28%. Reagan went on to triple the national debt, borrow from the Social Security trust fund to make up for his loses, and went on to raise taxes eleven times primarily on the middle class.
Ronald Reagan isn’t the only one who is to blame for the shrinking middle class. One major part that isn’t talked about is capital gains. The Capital Gains tax is the tax put on the wealth that an individual has that is not part of their regular income. Stocks, bonds and real estate are prime examples of what is considered capital gains. While Reagan did lower the top capital gains rate from 28% in 1980 down to 20% by 1986, he did feel the pressure of the debt crisis and brought it back up to 28% by the time he left office. The two big cuts that followed were disastrous. In his first term, President Bill Clintonz raised the top rate slightly to 29% but in his second term, with a conservative congress at his throat, lowered the rate once again down to 21%. The economy was doing well, mainly because of the Dot Com bubble and Clinton raising the top tax rates for the highest earners, but things did change once he left office. As part of George Bushes major tax cuts, he lowered the top tax rates down to 35% but took the capital gains rate down to its lowest level since the start of the Great Depression, 15%.
At the low rate of only 15%, the wealthiest Americans pay the same tax rate as a greeter at Wal-Mart. The Republican reasoning is that if you give the wealthy the tax cuts, they will then create jobs which, in turn, will strengthen the economy. The problem with this logic is that it doesn’t work, at least not in the way they say it should. The wealthy, primarily, do two things with their tax cuts: They either create jobs outside of the United States and pay for cheap labor or they take advantage of the capital gains rate. The wealthy put their money into the stock market or real estate and pay a very low tax rate which hurts the economy instead of helping it. In President Obama’s new American Jobs Act, the President has called for an end of corporate loop holes and an increase in the top tax rates. There are tax cuts in the plan, but they are tax cuts and credits that will be put into the hands of the real people who will invest and create jobs, the middle class and small businesses.
By increasing the tax rates on the highest earners, including the capital gains rate, the United States will have the revenue to truly get back on track. What the Republicans don’t understand is that the best way to chop away at the debt that they complain about is putting people back to work and getting money into the hands of people who will actually spend the money instead of stuffing it into a stock or putting it into an off shore bank account. While President Obama’s Stimulus package in 2009 put a cork into a sinking boat, it didn’t fix the problem. The stimulus bill prevented unemployment from reaching 12 and 13% and did create and save over 3 million jobs that otherwise would have been lost; however, it wasn’t large enough. The President understands that the country wants investment but also wants to see that it will be paid for and not just put on the country’s credit card. By raising the revenue from the people who have cheated the country for decades, the United States could raise its head up once again.
I can’t believe people would consider the prospect of going back to the failed policies that got us (America) into this crap and block bills that would get us going in the right direction…Maybe the Republican should be labeled as Left and the Democrats labeled as Right. They will clearly take us backward in time and as an Ex-Republican I am ashamed of the thought of that label! DLU.