Across-the-Board Tax Cuts Generate Inequality

Abstract The authors argue that across-the-board tax cuts, such as the Reagan tax cuts of 1981 and 1986, generate inequality on a very large scale. The windfall of money to the superrich is an order of magnitude greater than that of the rest of the society even if in percentage terms it is smaller. It is increasingly clear that there is “no natural, spontaneous process to prevent destabilizing, inegalitarian forces from prevailing permanently” (Piketty 2014, 21). We demonstrate with a straightforward model of how an across-the-board tax cut generates large-scale inequality.