"In this present crisis, government is not the solution to our problem; government is the problem." — Ronald Reagan, Inaugural Address, January 20, 1981
The tax-rate trend shown best illustrates which Reagan-era economic philosophy?
- Acheck_circle
Supply-side economics, claiming that lower marginal tax rates would spur investment, growth, and ultimately revenue
- B
Keynesian demand-side stimulus through deficit spending on infrastructure
- C
Mercantilism through high tariffs to protect domestic industry
- D
Progressive taxation to redistribute wealth via higher top brackets
Explanation
The Economic Recovery Tax Act (1981) and Tax Reform Act (1986) embodied supply-side ("Reaganomics") theory: cutting marginal rates to incentivize work and investment. The top rate fell from 70% to 28%.