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Effective (Federal Income) Tax Rates
A measure of how taxes became more progressive during the Reagan Era is the way effective Federal Income Tax rates fell for the poor much faster than they did for the rich. The effective tax rate is the single rate at which all income would be subject to if there was a flat tax for each person based on their deductions, income, and current tax rates.
The Reagan policies also reversed the rise in effective rates of the Carter Era, and as Supply Side predicted, revenues increased!.
| Effective Federal Income Tax Rates | |||||
|---|---|---|---|---|---|
| Quintile | |||||
| Year | Lowest | 2nd low | Middle | 2nd high | Highest |
| 1977 | -0.6 | 3.5 | 7.0 | 9.6 | 16.0 |
| 1980 | -0.4 | 4.5 | 8.1 | 11.0 | 17.1 |
| 1985 | 0.1 | 4.0 | 6.8 | 9.2 | 14.4 |
| 1990 | -1.5 | 3.5 | 6.7 | 9.0 | 15.6 |
| % Change | |||||
| 1977-80 | -33.3% | 8.6% | 15.7% | 14.6% | 6.9% |
| 1980-90 | -275% | -22.2% | -17.3% | -18.2% | -8.8% |
Now, to tell you how discouraged the liberals were about this study, commissioned by Congress--then in Democrat hands, they had the study reworked to include every tax they could think of, from Social Security to (get this) corporate income taxes and employer paid payroll taxes. Only then could they produce a "study" that purported to "show" that only the rich received a tax break in the 1980s. It takes a real socialist to think that wage earners (and only non-supervisory workers at that!) pay corporate income and employer payroll taxes directly. Not to mention the fact that the original study was supposed to measure the effect of Federal income taxes, not every tax from A-Z.
As we have demonstrated, the truth is that at the Federal level the tax burden fell across the board, with the lowest income bracket getting the largest tax break. Indeed, many low income wage earners stopped paying taxes altogether because of the combination of deductions, indexing and lower rates.
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