Higher top tax rate
Lower top tax rate
95th 2.11% 1.62% 60th 2.22% 0.97% 20th 1.96% 0.58%
When top tax rates were higher, the middle class was actually holding its own against the folks at the top, and the poor were moving up at roughly the same rate as the rest of the nation. When tax rates were cut at the top, there was a radical change. Under the low taxes on the wealthy regime, middle class growth was cut in half. Growth of income for the poor was cut to less than a third of the previous pace.
Why? Because cutting taxes at the top does exactly what the conservatives have always advertised—it encourages the wealthy to make more money. However, personal taxes aren't paid on the revenues of a company. They're paid on how much you take home. Cutting taxes at the top encouraged the wealthy to put more cash into their own pockets and hold back pay that otherwise would have gone to middle class employees and the working poor...
When taxes drop so far that they cease to be a consideration, the best move is to simply grab all the money while it's available. Why tempt fate in the marketplace, why risk unforeseen circumstances, why do all that boring old work if you can simply pocket the profits and run?
The current system provides no incentive to build companies and systems that can stand the test of time, companies built around valuable and educated workers who have a stake in the success of the company, community, and society. We've built a system that's tottering on the edge of terminal instability, and those calling for still lower taxes are likely to knock out the last supports holding up the floor.
Serfs up: how coddling the rich is destroying the American dream
So, to be fair to rich people, they're not actually any stupider than the rest of the population. They voted for Reaganomics because it was in their own short-term best interest. Presumably the rest of the working class Republicans thought it was in their interest, too.
But they were wrong. And we know that now. The empirical data is there, the history is told. But it requires understanding, and that requires honesty. One dishonest way to look at the past is to smear it all together; to lump the two categories in the table above into one. Then the dismal performance of the last 25 years erases the good performance of the previous period, and so the conclusion becomes that we have to roll back the whole thing. This is what a lack of nuance does.
In fact, the Republicans are using this strategy right now, claiming that Obama is responsible for the economy that Bush built. (They've even convinced some people that Obama created the TARP act!) No wonder they think nuance is a dirty word.