Here is where the problem lies with the conservative argument defending tax breaks for the top 2%. It is causing a greater gap in our income brackets.
The disparity of income in this Country has grown to Gilded Age levels.
In 1925-26 the top marginal income tax was DROPPED from 73% to 25%. This caused the greatest disparity in income in our history until today.
The rich KEPT most of their money and it wasn’t distributed through out the economy.
What happens here is a smaller pool of people are HOLDING a larger share of the wealth.
This essentially puts a strain on DEMAND for products. The wealthiest can only consume so much and we all know it is CONSUMPTION that drives our economy. In fact it is 2/3rds of our economy.
In 1926 and now in 2010 we are at the same crossroads. The top 2% are holding a majority of the wealth and the pool of consumers has shrunk to pre-depression numbers.
(HOW MANY CARS IS PARIS HILTON GOING TO BUY?)
Essentially the majority of the wealth they are keeping is sitting in banks or stocks and even in the Cayman Islands. It is not creating demand, which puts people to work.
Raising the income tax on the top 2% enables greater tax credits,breaks and a lower income tax rate for working middle class people. This puts more money in the hands of MORE people, spurring demand to a greater amount than a handful of millionaires.