When I first arrived in Washington in 1982, the Dow Jones was at a low of 800. You may not believe that, so feel free to look it up.
If anyone had predicted that the Dow Jones would cross the 50,000 mark in just over forty years, he might have been committed to a mental institution. But US stocks have grown sixty-fold (not counting inflation). Even taking inflation into account, the Dow Jones is up about twelvefold. We have experienced perhaps the greatest period of wealth creation in the history of the world.
No other country has even come close in modern times. Consider that U.S. publicly traded companies are now worth more than $70 trillion.
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Is China catching up? Yes, but they have a lot of work to do despite having four times more people than us. The market capitalization of all Chinese companies is estimated at approximately $11 trillion. The market capitalization of all European Union countries is roughly $16 trillion. Japanese companies are worth $7 trillion.
We are worth about as much as the rest of the world combined, even though we only have 5% of the world’s population. THAT should get you out of your seat shouting, “USA, USA, USA!”
We have experienced perhaps the greatest period of wealth creation in the history of the world.
This wave of prosperity did not happen by accident. It is the triumph of good economic policy – including the sharp decline in tax rates and moderate inflation brought about by two of our greatest pro-business presidents, Ronald Reagan and Donald Trump.
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Rewind to 1981 when Reagan came to power: inflation was about 12%, the top income tax rate was 70%, the corporate rate was 46%, the estate tax was 70%, and the capital gains rate was 28%. The economy was in a state of collapse.
Today, inflation is around 3%, the top income tax rate is 39.6%, the corporate rate has fallen to 21%, inheritance tax is 40% and capital gains tax is taxed at 23.4%.
Supply-siders like Steve Forbes, Arthur Laffer and Larry Kudlow should take a bow. They were right about lowering tax rates and inflation, which would boost growth and prosperity. The income redistributists were wrong to think that the rich would pay much less in taxes. They pay more. The top 1% now pays about 40% of income taxes.
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That’s the good news. The bad news is that so many Democrats have not learned the lesson that lower tax rates create more prosperity. Moreover, the evidence also shows that even with these lower tax rates, the richest 1% are paying a greater share of the tax burden than ever before.
The US city with the highest combined federal/state/local income tax rate is New York City. The new mayor, Zohran Mamdani, was elected and promised that millionaires and billionaires would pay more taxes to close a $10 billion deficit.
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California is our most populous state. Liberal Democrats want to put a first-in-the-nation wealth tax on the ballot, which has already caused an exodus of millionaires and billionaires from the state.
Meanwhile, in Washington DC, Trump predicts that the Dow Jones will reach 100,000 points by the time he leaves office. That’s certainly a bit of an exaggeration, but the past forty years have proven that supply-side miracles can become a reality.
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