Wealth Inequality Explodes: Reagan Policies Accelerate Income Gap

Income and wealth inequality surge during the Reagan presidency, with the top 1% of earners capturing an increasingly disproportionate share of national income while middle and working-class incomes stagnate. The top 1% income share rises from 9.0% in 1979 to 13.8% by 1986—a 53% increase in less than a decade. The Gini coefficient, a standard measure of inequality, reaches 0.450 among Black Americans and 0.382 among white Americans by the late 1980s, representing a rapid acceleration of inequality that had grown only slowly during the 1970s. Tax cuts for the wealthy combined with attacks on labor unions and social program cutbacks systematically redistribute wealth upward.

Reagan’s tax policies directly drive the inequality explosion: the 1981 Economic Recovery Tax Act slashes top marginal rates from 70% to 50%, with further reductions to around 30% by the late 1980s. Between 1979 and 2007, the top 1% of households see after-tax income increase 175%, while the bottom 20% experience only 18% gains. The tax cuts promise to spur investment and growth that benefits everyone (“trickle-down economics”), but instead concentrate wealth at the top as the wealthy use tax savings for speculation and asset accumulation rather than job-creating investment. Cutbacks in income transfer programs during the Reagan years further increase both poverty and inequality.

The Reagan-era inequality acceleration has lasting structural consequences: union-busting following PATCO destroys worker bargaining power, financial deregulation enables financialization and short-term profit extraction, and weakened antitrust enforcement allows corporate consolidation and monopoly pricing. The combination creates a permanent upward redistribution mechanism: productivity gains flow to capital rather than labor, corporate profits fund executive compensation and stock buybacks rather than wages, and tax policy rewards wealth accumulation while working families face payroll tax increases. By establishing inequality acceleration as acceptable policy, Reagan inaugurates four decades of middle-class decline and oligarchic wealth concentration.