Like Roosevelt and Johnson before him, Reagan spoke of “economic freedom” and proposed an “economic Bill of Rights.” But in contrast to his predecessors, who used these phrases to support combating poverty and strengthening economic security, economic freedom for Reagan meant curtailing the power of unions, dismantling regulations, and radically reducing taxes. Taxation, he declared, violated the principle that “the right to earn your own keep and keep what you earn” was “what it means to be free.”
In 1981, Reagan persuaded Congress to reduce the top tax rate from 70 percent to 50 percent and to index tax brackets to take inflation into account. Five years later, the Tax Reform Act reduced the rate on the wealthiest Americans to 28 percent. These measures marked a sharp retreat from the principle of progressivity (the idea that the wealthy should pay a higher percentage of their income in taxes than other citizens), one of the ways twentieth-century societies tried to address the unequal distribution of wealth. Reagan also appointed conservative heads of regulatory agencies, who cut back on environmental protection and workplace safety rules about which business had complained for years.
Since the New Deal, liberals had tried to promote economic growth by using the power of the government to bolster ordinary Americans’ purchasing power. Reagan’s economic program, known as “supply-side economics” by proponents and “trickle-down economics” by critics, relied on high interest rates to curb inflation and lower tax rates, especially for businesses and high-income Americans, to stimulate private investment. The policy assumed that cutting taxes would inspire Americans at all income levels to work harder, since they would keep more of the money they earned. Everyone would benefit from increased business profits, and because of a growing economy, government receipts would rise despite lower tax rates.
This photograph of the remains of the Sprague Electric Company in North Adams, Massachusetts, which closed in 1985, depicts the aftermath of deindustrialization. Today, the building is the site of the Massachusetts Museum of Contemporary Art.