To the Editor:
There is a strong belief that the party and president in power should get the credit or blame for the state of the economy. However some give more credit to events and trends.
The big thing in recent years has been the computer and the information age it ushered in. This has been a tremendous stimulant to our economy.
Politically the tax cut that Reagan was able to get past a reluctant Congress helped supply the capital needed to finance this new technology. Cutting the top income tax rate from 70 percent to 28 percent freed up much more money than taxes saved.
With the top rate at 70 percent many people were reluctant to put their money at risk, knowing that should there be gain they would be allowed to keep only 30 percent of it. The safe haven of tax free investments lost favor when the new 28 percent rate was enacted. A great flood of new money became available to finance this new industry, which in 10 years built a complex as great as the automotive industry developed in 80 years.
And what happened to tax receipts at the new low 28 percent rate? During the eight years of the Reagan administration receipts went up from $500 billion to about $900 billion per year as the economy grew. However, annual deficits also continued at about $200 billion per year.
Over the years since WWII our leaders have all promoted free trade. GATT, the General Agreement on Trade and Tariffs, and later NAFTA removed barriers to trade. The demands worldwide for a higher standard of living have contributed greatly to our prosperity and will continue, barring war or other catastrophe.
As long as our government devotes its energies to governing, maintaining law and order, maintaining the general welfare, promoting domestic and worldwide tranquility, and does not enter into the control and management of markets and industries the nation will continue to prosper.
We see in other places how the heavy hand of government has held back economic growth. It is our responsibility to make sure that we do not permit this to happen here.
In the last 10 years there have been tax increases that have resulted in the top income tax rate being raised to 39.6 percent. To some of us this sounds like punishing success. Perhaps it is time for another across the board tax cut.