Tax Rate Cuts and Economic Prosperity

Stephen Moore, writing in The Wall Street Journal, makes anew a number of points about the effect of taxes on a free market economy.

1920s: the Coolidge administration reduced income tax rates across the board, including cutting Woodrow Wilson’s WWI top rate of 73% to a peacetime rate of 25%.

  • Tax revenue to the Federal government doubled: the share of taxes paid those making more than $100,000/year ($1 million in today’s terms) rose from 28% to 51%.
  • Minor point: the economy boomed into 1928, raising the income and standard of living for all Americans.

1930s: the Franklin Roosevelt administration raised the top income tax rate to 63%, then to 79%, during the Great Depression.

  • This extended the Depression.
  • Post-war, those continued high rates (with the top rate now at 90%, a level reached during the war) slowed down the recovery and conversion from a war economy to a peace economy.

1960s: the original supply-sider, John F Kennedy, cut tax rates across the board by 30%, saying the lower rates would “boost the economy, produce revenues, and achieve a future budget surplus,” and be “an investment in the future.”

  • Tax revenue to the Federal government rose by 8.6%/year.
  • Unemployment fell to an historical low of 3.4%.
  • Those making $50,000/year (Obama’s $250,000-ers) saw their share of those tax revenues rise to 15% of the total from 12% prior to the rate cuts.
  • Those making $50,000/year also saw their tax payments, in absolute terms, rise 40%.
  • Those especially evil Americans making more than $1 million/year saw their tax payments in absolute terms rise from $311 million to more than $600 million.

1980s: the Reagan administration cut tax rates across the board, lowering the top rate first to 50%, then to 28%.

  • The economy roared.
  • Unemployment fell from the Carter administration’s historic highs to 5.3%.
  • Inflation fell from the Carter administration’s peak of 13.5% to 4.8%.
  • Tax revenue to the Federal government doubled from $517 billion to above $1 trillion.
  • The share of total income taxes paid by the evil top 1% of Americans rose from 18% to 25%.
  • The share of total income taxes paid by the evil top 5% of Americans rose from 35% to 44%.

2000s: the Bush the Younger administration (re)lowered tax rates across the board, this time, for instance, from 39.5% to 35% at the top.  The administration also lowered taxes on capital gains and dividends significantly.

  • Tax revenue to the Federal government rose by $780 billion.
  • Tax payments by millionaires generally doubled: the booming economy both created more millionaires and sharply increased their incomes.
  • The share of total income taxes paid by the evil top 1% of Americans rose from 35% to 41%.

The problem is, though, that President Obama and his fellow Progressives are fully aware of these data.  One has to wonder at Obama’s motives for demanding to raise tax rates.

One thought on “Tax Rate Cuts and Economic Prosperity

  1. Pingback: Progressives and Taxes | A Plebe's Site

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