Yes, but his policies successfully "Broadened the Tax Base" and got more people working. This was a result of the rate cuts. He never could have raised taxes, mainly on the wealthy, if the economy hadn't been improving.
Here's an excerpt on "Broadening" as well as explaining the positive effects of the reduction on the cost of capital, very relevant today, as the recession hits the middle/lower middle class hardest.
One criticism that is raised against the Reagan years is that there was a rise in income inequality. The historical record, however, does not support such a conclusion. Data collected by the Federal Reserve reveal that there was, at worst, no significant change in income inequality between 1983 and 1989.[7] Moreover, IRS data indicate that the wealthy paid an increasing share of income taxes during the 1980s.[8]
These observations are consistent with economic theory. In a slowdown or a recession, the wealthy can take care of themselves through their savings and investments. Data show that the wealthy derive a much greater portion of their income from capital investments.[9] Low-income individuals, however, derive most of their income from wages and salaries, which typically decline during recessions. Since they have less savings to draw on, low-income individuals bear the burden of anemic growth far more than the wealthy. Low-income individuals are further hurt by the fact that wage and salary growth is contingent on economic growth.
Critics of the Reagan years assert that cutting taxes on capital is unfair because more of the benefits (in terms of taxes returned to taxpayers) go to individuals with higher incomes. Cutting taxes on saving and investment, however, has implications beyond just the effect on tax returns, particularly with regard to which people are affected. Lower taxes on capital serve to encourage its use. More capital leads to higher wages, increased incomes, and more high-quality jobs. By raising real wages, a reduction in taxes on capital encourages greater workforce participation and spurs investments in human capital, education, and training. Whenever the economy's stock of capital increases, the relative income shares of those already wealthy decline. As a result, the gains from economic growth are spread more evenly across the population.
In fact, data from the 1980s show that a good deal of the alleged rise in inequality is attributable to greater workforce participation. Most studies on income inequality rely on data compiled from tax returns. These studies often point to the fact that the income of some tax returns increased faster than others (even if most households increased in wealth). The problem with these numbers is that they fail to account for increased female labor force participation. Women who were not working previously chose to enter the labor market, since lower taxes on the product of labor increased the net compensation of their work. With two earners, families with these new labor force entrants saw rapid increases in their family income, creating the appearance of inequality. In reality, these number's simply reflect the fact that more people were working.[10]
Median Family Income Falls Under Policies of Higher Taxes
For the typical American family, slower economic growth may seem an abstract economic theory. The effects of slower growth, however, have been undeniably felt by working American families. The increase in taxes during the Bush/Clinton recovery has lead to a noticeably negative effect on family income (Figure 5). In 1991 alone, the median family income, adjusted for inflation, fell by $957.[11] In 1992 and 1993, real median family income dropped by $461 and $709, respectively, resulting in a net fall of $2,127 in inflation-adjusted income during the current recovery.
