Editorial: Reagan Soaks the Rich

Even Walter Mondale asserts that President Reagan is clever on television, but the good Vice-President doesn’t know the half of it. For two years in a row, while seeming to be their friend in Washington, President Reagan has succeeded in getting more tax revenue from the rich than any President before him. The man charms you while he takes your money.

In 1981, people making more than $100,000 paid only $44 billion in taxes; in 1982 this went up to $49 billion; in 1983 up to $56 billion.

Moreover, the tax burden has shifted dramatically away from the poor and onto the rich. The poor now pay a lower proportion of taxes; the rich now pay a higher proportion. From 1981 to 1983, the proportion of taxes paid by those earning under $15,000 went down from 9.1 percent to 8.4 percent to 7.4 percent (or $5.5 billion less in 1983 than in 1981).

Meanwhile, the burden assumed by those earning over $100,000 went up from 15.0 percent to 17.3 percent to 19.6 percent (or $12 billion more in 1983 than in 1981).

When this trend was first noted in 1982, critics of Reagan scoffed that the rise in taxes paid by the rich was due to the stock market boom of 1982. That cannot be said in 1983. Besides, IRS figures now show conclusively that what has exploded between 1981 and 1983 was primarily “entrepreneurial” income, not income from investments.

The “tax Gini coefficient” shows that taxes were more “progressive” in 1983 than in 1981 (i.e., the rich pay a larger share), registering an increase from .6488 to .6560.

It is the rule in some quarters, of course, to give the President credit for as little as possible—and preferably, for nothing at all. Some people like to picture politicians they oppose as at least faintly immoral. (Perhaps for them politics is a form of religion, a battle between Good and Evil.) So, feeling instinctive opposition to Ronald Reagan, such persons really want to find his policies immoral. That makes them feel better.

In Reagan’s case, since Inauguration Day 1981, this has meant showing that the President loves to help the rich at the expense of the poor. The “fairness” issue.

Never mind that the greatest assault on the poor is inflation, which climbed more than forty-three percent from 1977 to 1981, before Reagan, and since then has been drastically reduced. Some of those viscerally opposed to Reagan have had to believe that his tax cuts hurt the poor and helped the rich. Evidence to the contrary deeply troubles them.

Some critics (e.g., Joseph Minarik of the Urban Institute) say, Well, the rich are paying more than ever, but so what? The number of those earning $100,000 or more grew by 175,000 from 1981 to 1983, so the total taxes from this category are understandably higher.

Still, imagine the outcry if the figures were reversed! Imagine if, now that the proof is in, the rich were paying fewer dollars in tax and shouldering a smaller burden, while those below $15,000 were paying more dollars and carrying a heavier share!

The true outcome should never have been hard to predict. The difference between tax rates and actual dollars paid in taxes is crucial. Sound theory holds that, within certain limits, lowering rates raises actual dollars. With affluent Americans from 1981-1983, this theory has held true as predicted.

Here again is what the facts show. The bottom half of all income earners paid only 7.1 percent of all federal income taxes in 1983 (down from 7.5 percent in 1981).

Meanwhile, the top 1.36 percent (those earning more than $75,000) paid 23.3 percent of all federal income taxes in 1983 (up from 20.4 percent).

As Joseph Minarik points out, in 1983 Ronald Reagan’s supposed special “friends,” the 11,526 millionaires, paid $5.3 billion more in taxes than they had two years earlier. Their actual tax burden doubled, from $4.9 billion to $10.2 billion.

Who got the benefits of the Reagan tax cuts, then? Remember the horror stories in the media in 1982? They were wrong. Every income level below $50,000 paid fewer dollars and a lower proportion of all taxes paid in 1983 than in 1981. On the actual record of fact, the Reagan tax cuts lessened the federal tax burden of those earning $50,000 or less, just as he said it would.

Theologians and moralists, even those whose earlier hellfire warnings about “unfairness” turned out to be wrong, will no doubt rush to praise the morality of the Reagan tax cuts. Won’t they?

Michael Novak

By

Michael Novak held for many years the George Frederick Jewett Chair in Religion and Public Policy at the American Enterprise Institute and is now a trustee and visiting professor at Ave Maria University. He is a philosopher, theologian, and author, as well as the 1994 recipient of the Templeton Prize for Progress in Religion. He has been an emissary to the United Nations Human Rights Commission and to the Conference on Security and Cooperation in Europe. He has written over twenty-seven books on the philosophy and theology of culture, especially the essential elements of a free society. He also founded Crisis Magazine with Ralph McInerny in 1982.

MENU