When North Carolina Republicans took power, one of the first things they did was change the tax code to benefit the wealthiest people in the state. They followed the same principles that the Reagan revolutionaries followed, shifting the tax burden from the rich to the middle class. The results of thirty-five years of supply-side economics are in and they’re great—for the wealthiest Americans.
The principles laid out under Reagan have guided our national economic policies since 1981. They’ve slashed investments in government programs designed to help people on the lower rungs of the economic ladder climb higher. They cut the top marginal income rate by more than 40%. They slashed the capital gains tax by half and they’ve applied the estate tax to only the very richest families.
As a result, the top one percent have gained a substantially larger piece of the economic pie. In 1980, the wealthiest 1% earned only 11% of the income while the bottom 50% earned 21%. Today, the 1% earn more than 20% while the bottom 50% earn only 13%. In other words, we’re shifting income from the poorest to the richest thanks to Republican economic policies.
The 2018 World Inequality Report concludes that the shift is the result of “massive educational inequalities” and the tax structure that rigs the system for the rich. In North Carolina, Republicans are doubling down on the formula. They’re cutting taxes for the wealthy and large corporations while reducing the amount of money that goes to public schools, universities and community colleges.
From 1933, when Franklin Roosevelt introduced the New Deal, until the Reagan Revolution, the country had an economic system that focused on the middle class and providing tools to help poor people improve their economic conditions. The Democrats who ran North Carolina supported that vision. They built a world class university system that focused on providing educational and economic opportunity to North Carolinians. We built one of the best community college systems in the country to provide a well-trained workforce and attract the industry that needed it. The tax system they devised was moderately progressive, taxing the income of the wealthiest citizens at a higher rate than the poorest and taxing corporate income.
Today, any effort to mitigate the negative impact of supply-side economics and the accompanying decline in investment in educational opportunities is gone. Republicans in North Carolina are turning on the gas in transferring both income and opportunity to the people who already have both. They’ve shifted the tax burden from the wealthy to the middle-class and are working on eliminating the corporate income tax altogether. We’re 39thin per pupil spending and our investment in our universities and community colleges is declining. Our schools are re-segregating, ensuring that the population the was systematically denied access to capital for the first two hundred years of our country will continue to be marginalized.
The free-marketeers would call this shift in prosperity freedom. I call it plundering. The well-to-do have created a narrative about how they worked hard to get what they’ve got when in reality they were usually born into it. Social mobility in the state is decreasing, not increasing. Today, Charlotte has the lowest social mobility of the fifty largest cities in the country. The so-called tax reforms that Republicans instituted will make it worse, not better.
Thomas Mills is the founder and publisher of PoliticsNC.com. Before beginning PoliticsNC, Thomas spent twenty years as a political and public affairs consultant. Learn more >
I am a candidate for the NC State Senate in the district which includes Transylvania, Henderson, and Southern Buncombe County, the evidence of low income is everywhere. It is most evident though in the Free or Reduced lunch rate in our schools. Over and over again, the Republicans boast about the low unemployment rate. Sure people have jobs. But they haven’t an income sufficient to put roofs over their head and health care adequate to keep them fit. We need to pay living wages, restore the earned income tax credit. We need to get our richest people and corporations to carry their weight.
In the early years of Reagan policy analysis and new budgeting techniques were implemented to include a cost-benefit analysis of each new public sector expenditure. Block grants were distributed to states with fewer strings attached and a cafeteria-style of available federal services could be used by the states in the mix needed for their local constituencies. Of course the distribution effects of any net benefits were not considered – any net economic improvement from a policy or program was green-lighted under this approach. Fast-forward to the present and we see that distribution effects appear to matter more to Congress by who specifically is denied benefits as opposed to who is helped. We’re told politically that specific groups are not ‘worthy’ of government assistance, that they must show more legitimacy (work, citizenship, etc., and that they must be reminded of who to thank for their paychecks. Our government has always discriminated in the sense that vertical equity makes sense – that different people are treated differently economically. But there are contemporary political considerations that stress the importance of a competing axis of fairness in the area of economic justice – that is horizontal equity, in other words treating equal people equally. Our constitution does not settle these competing views of justice so we get a mish-mash of both principles in almost every piece of law or public policy. We further handicap our political discourse when we assume or insist that every outcome is zero-sum. deTocqueville pointed out many of these dichotomies in his observations about American democracy. None of this is new except for what is new again…
Thanks for pointing out the “arguments” used to underpin this.
A Google search of top marginal federal income tax rates refutes a major contention put forth in your essay that the tax policies under the Reagan administration have guided U.S. economic policy since 1981. That’s blatantly untrue when it comes to federal income taxes.
Under the Reagan tax reform in 1986, the federal top marginal rate was reduced to 28 percent. It was raised to 31 percent in 1991 under the first Bush administration. It was raised again in 1993 to 39 percent with the support of the Clinton administration.
Under Bush II, the top marginal rate was reduced to 35 percent in 2003 and remained there until 2012. It was raised to 39.6 percent in 2013 plus another 3.8 percent for top earners pursuant to the Affordable Care Act. Thus the top rate under the Obama administration was 43.4 percent, a 55 percent increase over 1986.
Under the Tax Cut and Jobs Act of 2017, the top marginal rate is now 37 percent. Claiming that the principles laid out under Reagan have guided our national policies since 1981 is, unfortunately, completely false, as is the assertion that investments in government programs to help lower income people have been slashed.
Greed and faux-Christianity go hand-in-hand in this treatment of ‘the people’ by those in power. What would Jesus do? Well, first he might weep over the pure injustice of it all, but then he would likely embrace his anger and throw the money changers out of the temple. I suggest we do the same starting this November!
If you ever really believed that multi-millionaires and billionaires were no different than the rest of us, take a hard look at Trump and his cabinet. Many of whom, like Trump, got their wealth by inheriting it and not from hard work. Look at the way they spend their money, and tell me they are “job creators.” And, explain, again, why anyone needs an annual income of millions of dollars. What you get are people like the Kochs who use their money to force the rest of us to live the way these tyrants want us to live. For the GOP state and national legislators, income inequality if the only thing they can agree on–so, stick it to the middle and lower income classes. Good piece, Thomas.
This is valuable! Thank you, Thomas. I plan to share it widely!
A message that all of us progressives need to share widely – thanks, Thomas, and for the link to the source article on the 2018 World Inequality Report.