Reaganomics

A lot of people in this country do not believe in taxes. They believe that they can handle their own money much more efficiently than any bureaucracy ever could. Opponents to taxes, generally speaking, believe that more money out of the hand in government is a good thing. How little or big government should be is certainly an interesting question. But instead of entering that maelstrom, today I'd like to talk about the progressive income tax. Trickle down economics in a lot of ways is a criticism of progressive income tax. The logic goes that if we free up capital amongst the richest (theoretically the entrepreneurs) then business will boom, and if business booms, then so too will America boom and everyone will benefit. A lot of things about that logic seem faulty to me, but a recent article in Commonweal illustrates my concerns empirically.
Despite the DOW's climb over 13000, the biggest growth area in America is the wealth of the wealthy(especially the wealthiest of the wealthy). The results of a 15 year study on inequality in America were just released.

The figures are startling. Since 1980, a period of prolonged stagnation in inflation-adjusted median incomes, the income share of the bottom 90 percent of families has fallen by about 17 percent (see Figure 1). Even the very upper-middle class folks in the 90-95 income percentiles barely kept their shares constant, while the top one-thousandth and top ten-thousandth have more than doubled and tripled their shares. The top ten-thousandth, fewer than fifteen thousand taxpayers, now collect 3 percent of all personal income.(Morris, Commonweal)

If you look at inequality over time today's levels are the highest since 1928, whereas the lowest periods were the 50s-Early 70s. Highly taxed upper tax brackets and strong Unions kept inequality low in the period after WWII, a period of tremendous economic vitality and growth. The 1930s stand in stark contrast and were the furthest thing from economics vitality in this country's history. Any similarities between our economics state and the climate preceding the Great Depression should be troubling enough, but I mention the history only to illustrate my point that heavily taxing the rich does NOT prevent growth. The rich do not drive American growth, the middle class given good prospects for growth and advancement drive American growth. If nothing else taxes can provide a means a redistributing wealth. Trickle down economics does not make sense. If you want growth you should fuel the engine. You should not pour fuel on the hood hoping it will find its was down to the engine.