Judged in the short term, Reagan’s tax cuts might hardly be viewed
as a neoliberal ‘revolution’. From a broader perspective, however,
their cumulative effect amounted to nothing less than a full-blown
assault on state-led redistribution of private wealth. The Tax Reform
Act of 1986, in particular, reduced the number of tax brackets to four
while reducing the average individual income tax rate by about 6%.
In an attempt to address mounting fears over the growing budget
deficit, the Tax Reform Act raised corporate taxes to offset cuts in
personal income taxes, thus seeking to make the latter ‘revenue
neutral’. But critics were quick to point out that Reagan’s tax reforms
27
First-wave neoliberalism in the 1980s
resulted in a dramatic widening of the income gap between the
middle class and the wealthy. Reagan’s initial tax cuts, implemented
in the early 1980s, led to a decline in government revenues that were
required to cover existing spending commitments in social policy
and dramatic increases in military expenditure. As a result, the
administration was forced to resort to enormous levels of deficit
spending to cover these revenue shortfalls.