NCPA - National Center for Policy Analysis

Clinton V. Reagan On Family Incomes

April 4, 1996

The evidence is in and the results are clear: family incomes increase when government lowers taxes and reduces the regulatory burden, according to economic experts.

  • Under the high-inflation, high-tax-rate policies of the 1970s, real family incomes fell for every economic group -- including a loss of about 8 percent, or $1,500, for a median family.
  • In the eight years following the Reagan tax cut, median family incomes rose 11 percent, or more than $4,000 per household.
  • But since 1989, the typical U.S. household has lost 5 percent of its income -- a $2,100 loss in purchasing power.

Reagan's abundantly successful policies were simple: cut marginal tax rates to reward work, investment, savings and risk-taking. Force Washington to join the productivity revolution by aggressively chopping away at the federal budget and regulations. But these policies were reversed in the Bush-Clinton years through tax increases and a new era of government regulation, highlighted by such measures as the Americans With Disabilities Act, amendments to the Clear Air Act, and Clinton's record tax hike which boosted the marginal tax rate from 28 to 40 percent.

In the Reagan era, low-earner households improved their lot. Households headed by blacks, for example, saw their income grow 14 percent -- versus 10 percent for those headed by whites. And the incomes of women grew faster than those of men.

Source: Stephen Moore (Cato Institute) and John Silva (Zurich Kemper Investments), "Middle-Class Blues," Investor's Business Daily, April 4, 1996.


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