I know very well how to read these graphs. It appears that you are the one who needs to go to graph reading school. You have to read these graphs with trend lines. I mean the reason it started going down is because the bottom 90 were at an unprecedented high in the late 80's. The true trend downward begins in the mid 90's onward. From 1980-1995 there is what I believe to be a positive trend. Even if you go back to the mid 70's you still have a neutral trend line. So the 80's saw strong growth whilest the income gap remained steady over time. Sure if you start your trend line at the inflection point then there's a negative trend for Reagan, but that's an incredibly dishonest technique.
I don't think we should sacrifice economic growth by just blindly raising taxes to keep up with what is essentially unnecessary demand from a public that will just seek more and more. You'd just have to constantly raise taxes until you get to a point on the Laffer curve where you can't support that demand anymore. The true answer, imo, is to keep taxes relatively low and most importantly simple. Also need to make social security, medicare more workable whilest doing away with most corporate welfare and wealthy individual welfare. I feel like this is a solution that a majority could get behind.
Check your bifocals. It's not the late-80s when the share for the 90% peaked. It's the mid-80s. It's been steadily downhill since then, with the precipitous drop in the late-00's. Now that may be quibbling, but I think it's important for a couple of reasons. First, when Reagan took office, the economy was at a low point. Given the business cycle, it was bound to improve whatever Reagan did and, as I pointed out, a lot of that growth came from a Keynesian deficit spending (largely on defense). Second, the tax reform of 1986 eliminated a ton of deductions/credits and lowered marginal rates. I'm not going to claim that the tax reform is at the root of the reasons why the inequality trends are what they are, but for those who believe that tax reform will turn the trend around, I think they are sadly mistaken.
The more pertinent trend has been the rise in share for the upper 0.1% that has risen upward steadily since the mid-1970s. Probably coincidental to some extent, but that trend began shortly after Lewis Powell (before his appointment to the Supreme Court) wrote his famous memorandum that unleashed an unprecedented wave of pro-business lobbying at the national level.
The root cause for all of this is the lag in household income. If median household income had followed the same pattern as overall economic growth, it would be nearly $40,000 higher per year than it is right now. That means income (which begats wealth over time) has been moving steadily to the higher percentiles. That means to "hold" their wealth, households have had to resort to consumer credit and harvesting the equity in their homes. However unfair that is in concept, it kept things afloat until the housing market crashed.
As for the tax burden, the United States ranks 32nd out of 34 OECD countries, so things can't get much lower. This ranking includes federal, state, and local taxes. I'm with you on budget hawkery, but Ryan's budget/tax bill simply doesn't add up. All it will do is cut the tax bill of those at the top while cutting services they don't consume. So much for any semblance of a social contract.
As for Social Security and Medicare, I'm all for reform. I was at a seminar the other night and two investment counselors will telling retirees (of which I am not) how to avoid their federal tax burden. Social Security isn't taxed, so this was about IRAs and 401 (K)s. But I found the whole thing ridiculous. A large segment of senior citizens in this country is concerned about not paying taxes while Xers and Millenials are worried about jobs and long-term economic trends. Social Security and Medicare are vital for a number of senior citizens, but what was designed as a subsistence/basic care programs has grown well beyond that. As a result, personal savings has gone down (until the 2008 meltdown) and consumption has gone up. Now I'm the one sounding like an arch-conservative, but that's no way to run a railroad. We need a predictable and sufficient tax system and a predictable and prudent budget that hovers around the balanced mark. I was down with Simpson/Bowles and was disappointed when it was dismissed by both sides.
