Since 1980s, the Kindest of Tax Cuts for the Rich

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The effective federal income tax rate paid by the wealthiest Americans has dropped significantly during the last several decades, largely because of tax cuts on investment income.

The last major overhaul of the tax code, signed by President Ronald Reagan in 1986, set tax rates on capital gains at the same level as the rates on ordinary income like salaries and wages, with both topping out at 28 percent. But that link was uncoupled by his successor, President George Bush, and the rates on capital gains were reduced by President Bill Clinton. President George W. Bush then lowered the rates on capital gains and dividends to a high of 15 percent — less than half the 35 percent top rate on ordinary income.

While rates for all American taxpayers have fallen to near 50-year lows, the wealthy have reaped the most savings from the changes because they derive a larger proportion of their income from investments.

Between 1985 and 2008, the wealthiest 400 Americans saw the percentage of their income paid in federal income taxes drop from 29 percent to 18 percent, according to data from the Internal Revenue Service....

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