To the editor:
Incomes in America are becoming more and more unequal, which endangers prosperity. In 1928 the wealthiest 1 percent owned 17 percent of all wealth (today they own 23 percent). But this disparity of income weakened the purchasing power of the public, which along with economic regulations caused the Great Depression.
Roosevelt and Truman then presided over a great downward redistribution of income and wealth. Corporate taxes rose from 14 percent to 49 percent. The top income tax rose to 73 percent. There was also an expansion of union power and so of wages, Not only did these measures not wreck the economy, they led to a 30-year-long economic boom. The economy grew at 2.64 percent a year, Living standards nearly doubled. Inequality diminished. We were all richer and we were all more equal.
The 30 years of big government and high taxes was followed by 30 years of small government and low taxes under Reagan and Bush. Reagan lowered the top rate for the income tax from 70 percent to 35 percent, the tax on corporate profits from 48 percent to 35 percent, and capital gains from 28 to 15 percent. Many other tax breaks came under Bush. But no miracles followed. Cutting capital gains and investment taxes did not lead to more investments. The economy did not grow by 2.64 percent a year, but only by 0.7 percent.
Though the economy did not grow, inequality of income did. Between 1980 and 2011, the wealthiest tenth of Americans increased their income from a third to nearly a half of the nation's income, while the wealthiest 1 percent increased theirs from nine percent to 23 percent. Others did not share in this growth. Under Reagan, incomes grew by only half of what they had. Incomes declined for those at the bottom. Wages stagnated. In the first four years of Bush's administration, median household income fell by $1,667. For 80 percent of Americans, inflation increased faster than income. We were all now poorer and less equal.
In short, the past century has taught us that the greater the income inequality, the lower the taxes, and the smaller the government, the slower will the economy grow, the more unfair the distribution of wealth and the greater the likelihood of a recession; whereas the lesser the income inequality, the higher the taxes, and the larger the government, the greater the growth of the economy, the fairer the distribution of wealth, the less likelihood of a catastrophic depression.
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