Reaganomics Propped Up Parasitic U.S. Leisure, Monopoly Class

As productivity continued to rise due to increasing automation and better technology, the theory posited that everyone's wages would follow suit.

When Reagan reduced the top tax rate to 28%, businesses became considerably more profitable, there was a greater incentive for CEOs to withdraw those profits from the company, benefiting from a shallow tax rate. I Photo: Reagan White House Photographs

The crucial element in this logic was the then-top marginal income tax rate. In 1963, the top marginal income tax rate was 90%, as disclosed by the Thom Hartmann Report.

What this high tax rate did was incentivize CEOs to reinvest more money into their businesses: to adopt new technology, increase workers' wages, hire additional employees, and expand operations.

The rationale was that there was little point in extracting millions of dollars from the business if it would be subjected to a 90% tax rate, or even the 74% rate that President Lyndon Johnson lowered it to in 1966.

If businesses were to become more profitable and efficient due to automation, the expectation was that these gains would be distributed throughout the organization—elevating everyone's standard of living and providing more leisure time.

The envisioned outcome was the creation of a Leisure Society.

However, when Reagan reduced the top tax rate to 28%, it marked a significant shift. With businesses becoming considerably more profitable, there was now a greater incentive for CEOs to withdraw those profits from the company, benefiting from an incredibly low tax rate.

And that's precisely what occurred.

The newfound profits, attributed to automation, which were intended to benefit everyone, became concentrated at the top. Suddenly, the balance in the productivity/wages chart was disrupted.

Despite ongoing increases in productivity due to technological advancements, wages remained stagnant. The lower tax rates promoted monopolies, as corporations faced reduced taxes, and stockholders capitalized on the increased profits.

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