President John F. Kennedy, Early Supply-Sider
President-elect Obama, listen up!
In this video from August 13, 1962, when the highest marginal individual income tax rate was 91% and the highest marginal corporate tax was 52%, President John F. Kennedy announced his plan to introduce permanent, across-the-board tax cuts for both individuals and corporations. Kennedy argued that both "logic and equity" demanded tax relief for Americans, and that the dollars released from taxation would create new jobs, new salaries, and spur economic growth and an expanding American economy, thereby creating more tax revenues.
Kennedy's supply-side tax cuts were passed, and by 1964 the top personal tax rate was 77%, dropping to 70% in 1965. In 1965, the corporate tax rates were reduced to 22% and 48%, from previous rates of 30% and 52%. The Kennedy tax cuts did help expand the economy, resulting in a 106-month economic expansion during the 1960s, the longest expansion in U.S. history until the 120-month expansion of the 1990s. In response to the cuts in tax rates, tax revenues actually grew by 65% from 1965 to 1970.
They sure don't make Democrats the way they used to.
22 Comments:
Alas, too many Republicans have also fumbled the supply-side ball..
To quote Richard M. Todd, VP of the Federal Reserve Bank of Mineapolis:
"Supply-side factors matter. Notably, zoning and land-use regulations can unduly inflate the cost of housing."
The NIMBY attitudes of many Democrats is sad, but not surprising.
But why have so many Republicans abandoned supply-side policies?
It strikes me as both absurdly partisan and also disingenuous to suggest that a marginal income tax rate of 39.6% has the same negative effect on the economy and personal productivity as 91/77/70 rate.
Dropping from 70% to 39.6% is going to have a bigger effect both relatively and absolutely than going from 39.6% to 35%. Bonus with the 39.6% rate being that we might actually have a prayer of balancing the budget sometime in the next 5 years.
I'm apathetic about the corporate income tax since it's debatable what the tax ends up being on there, anyway. Capital perhaps, but who knows. Keep it reasonable, and not egregious. I think a balance needs to be struck between growing the economy in a sustainable fashion and balancing the budget thanks to Bush's fiscal responsibility.
I don't see where/why it has to be all about supply side economics or demand side economics since it's fairly obvious that both play a role. The marginal benefit of lower taxes decreases the lower the tax rate goes, and supply side theory starts to fall apart. And I think the opposite is also true.
Bad timing to resurrect this hypothesis at this point in time. It is substantially mitigated by the elephant in the room: This Bush administration gave massive tax cuts to higher incomes and we now have the worst economic calamity since the thirties! Where's all the expansion and high employment generated by those low taxes for the wealthy?
the marginal tax argument always appeals to me. it's so perfectly logical. of course i'd work harder if i could keep more of my earnings!
the problem is, it doesn't seem to work in real life. gdp growth just doesn't seem to be related to marginal rates over the long term. i'd submit the last 8 years as one example. marginal rates cut, yet gdp growth was less than the prior 8 years where marginal rates were increased.
marginal tax rates have steadily decreased over the last 60 years. has the gdp growth rate steadily increased? nope. gdp growth jumps around as economic conditions change, but there doesn't seem to be any consistent increase in gdp growth corresponding to the decrease in marginal rates over the last 60 years.
marginal rates are busted. i'm sure many here will disagree with this. please post some credible evidence to support your opinions.
Well as usual anon @ 12:45 AM is long on the lie and short on credible substance: "This Bush administration gave massive tax cuts to higher incomes and we now have the worst economic calamity since the thirties!"...
Ten Myths About the Bush Tax Cuts
Hey bobble, thanks for the Krugman delusion...:-)
hey '1', your link doesn't work
Thanks to "1 said" for the input.
(1)"Data" generated by the Heritage Foundation is always suspect and is always construed to support its political agenda. (The "Mackinaw Center" is no different.) (2)It is interesting to note that the data to which I was referred reports only an
18-month upward bump in the economy alleged to have resulted from the Bush tax cuts. However, over the long haul, the cuts have remained en tact yet the economy has totally tanked. (3) One of the "myths" pointed out to me is "Myth #8 - Tax cuts help the economy by putting money in people's pockets". I suggest this applies to the wealthy as much as the lower classes. Granted, and certainly, some "trickling down" does occur but never close to the extent touted by supply-side devotees. In today's global economy much that new capital investment is occurring offshore and much less of that success trickles back into the domestic economy at large.
(This is great blog/website from which I stand to learn a great deal. It's a pleasure to chat with such informed individuals.)
> tax revenues actually grew by 65% from 1965 to 1970.
So what? "Fairness" -- that's what counts!!
-- Barry
Welcome to The Obama Nation, where reason and sense is less important than Stickin' It To The Man.
> Bonus with the 39.6% rate being that we might actually have a prayer of balancing the budget sometime in the next 5 years.
Don't be a fool. The only hope of "balancing the budget" would be to have every single current member of Congress taken out, horsewhipped, tarred and feathered, and run out of DC on a rail. Those useless bastards will NEVER balance the budget. Every single one of them sees "more money coming in" as a sign that they haven't voted for enough pork for their district.
Hangin's too good for 'em.
> yet the economy has totally tanked.
Yeah, that's all the fault of the tax cuts.
Suuuure. Can I have some of those drugs you're smoking? They must be pretty damned good psychedelics to let such a ridiculous connection continue to fester in your tiny brain.
To 1 re: Bush Tax Cuts:
I have never complained about "tax cuts for the rich" - the Bush tax cuts could more accurately be described as "tax cuts for parents." Got Kids?
Since tax revenues did not dive, incomes must have soared. (This,according to many conservatives, is an oft-touted benefit of tax cuts, and a Very Good Thing.
As an unskilled worker, my real income did not increase following the Bush tax cuts. Since incomes did, apparently increase, I effectively became worse off. (e.g. what with all the rising incomes around me, my rent increased 310 percent since 2002, while my housing space decreased by two-thirds.)
Can I really afford more tax cuts?
To Anonymous 3:44 -
It's "Mackinac Center" even though it's spelled "Mackinaw" due to some earlier confusion in northern Michigan.
The Mackinac Bridge crosses the Straits of Mackinac and links Michigan's two peninsulae, which, historically, were much like Two Americas, although not so much today.
To further complicate things, there is also a Mackinaw City.
OBloodyHell said:
Welcome to The Obama Nation, where reason and sense is less important than Stickin' It To The Man.
I think there are an awful lot of people who have been stuck to BY The Man, and this group finally reached critical mass this year.
Heck, after several years of voting Republican, (I voted Libertarian previously, after getting hosed on taxes by both major parties) I finally realized that it was going to be damn nearly impossible for me to get ahead as long as I remain under financial bondage to Reaganism.
(I have a monthly income of less than $1000, rent of $650, and a student loan garnishment of $130. Ongoing medical expenses of over $100 complicate my finances further. Never mind that if I could consolidate my student loans, I would qualify for a monthly payment of $10 - Reaganism says I cannot consolidate until I make a sufficient number of timely monthly payments of $80 ON TOP OF the $135 garnishment. Ain't gonna happen until my expenses decline (not likely since I cannot move anywhere because I lack move-in funds), my income increases, or Reaganism is repealed.
There are a lot of deeply held grievances in this country. I suggest you read an article titled "5 Pieces of Advice for the New Paupers" which articulates well just SOME of the realities faced and grievances held by the poor.
Friends,
It has been my experience that the lowest level of blog contributor quickly resorts to silly personal attacks and put-downs(e.g. "O Bloody Hell" - "psychedelics . . .in your tiny brain") - rather than an intelligent argument - directed toward those who disagree with them. I'm disappointed to find this on an otherwise intelligent and sophisticated blog site.
In fact, it is the supply-siders who incessantly preach that low taxes for the wealthy necessarily, in and of itself, results in a very healthy and successful free economy. I simply pointed out that our recent history does not support that contention.
Poor Boomer - Thanks for the spelling comment. Most of us Michiganders are so fatigued of the
endless and tiresome Mackinaw vs. Mackinac spelling debate, we just use them interchangeably and to no harm. Thanks anyway.
""Data" generated by the Heritage Foundation is always suspect and is always construed to support its political agenda"...
Yeah, its an ugly thing when the political agenda of the Heritage Foundation is all about following the Constitution...
"It is interesting to note that the data to which I was referred reports only an 18-month upward bump in the economy alleged to have resulted from the Bush tax cuts"...
Which of course is pure, unadulterated baloney, more of that Krugman delusion syndrome...
"However, over the long haul, the cuts have remained en tact yet the economy has totally tanked"...
For which we can thank YOUR fellow travelers for...
"I suggest this applies to the wealthy as much as the lower classes. Granted, and certainly, some "trickling down" does occur but never close to the extent touted by supply-side devotees"...
More of the Krugman delusion syndrome at work again since the rich pay more than their fair share of taxes...
"In today's global economy much that new capital investment is occurring offshore and much less of that success trickles back into the domestic economy at large"...
Can you say, "Sarbanes-Oxley"?
"hey '1', your link doesn't work"...
It sure does bobble... Works just fine...
"Can I really afford more tax cuts?"...
Can we as a nation continue to afford you poor boomer and others like you, isn't that the real question?
I say we can if we get rid of our collective addiction to entitlements...
1: "It sure does bobble... Works just fine..."
nope. point lost. no credible evidence provided.
[i think you are trying to direct me to qtau.com. the link is to i.qtau.com which displays html source]
1 said:
More of the Krugman delusion syndrome at work again since the rich pay more than their fair share of taxes...
Depends on your definitions.
You seem to hold to an idealized notion - or perhaps fantasy - that everyone earns commensurately with what they produce.
As a veteran of the low-wage labor sector, I dispute your assumption.
At my last formal job, every hourly employee was paid within 20 cents of minimum wage. (Those top earners are lifers there; I am not aware of any raises (other than those explicitly due to increases in the minimum wage) there within the past five years.
Employee performance varied widely, yet all were paid within a narrow twenty-cent range. (Some employees were well worth twice minimum wage and some weren't even worth minimum.)
So I am absolutely not buying the theory that people are paid what they are worth.
However, from a tax standpoint, the low-wage worker contributes substantially more by being underpaid than he contributes by being paid an appropriately higher wage.
What the worker loses by being underpaid, is gained by the employer in the form of profits, which are almost invariably taxed at a higher rate (thereby generating more tax revenue) than the employee's wages.
So the way I see it, I (and my co-workers) have contributed much in taxes; it's just that most of the taxes were collected off the multimillion dollar profits of my employer, rather than from the minimum wages of the employees - which sucks from the employee's perspective, but totally rocks from a tax collector's viewpoint.
Two words with respect to Kennedy's policies: Dynasty Building.
That's what it was, no more, no less.
"In fact, it is the supply-siders who incessantly preach that low taxes for the wealthy necessarily, in and of itself, results in a very healthy and successful free economy. I simply pointed out that our recent history does not support that contention"...
Well your sad, pathetic attempt to do so anon fell far short of its goal to make that rational argument...
"nope. point lost. no credible evidence provided"...
Poor bobble, maybe you can get someone who knows how to navigate the web and read to help you... Thanks for playing...
poor boomer says: "You seem to hold to an idealized notion - or perhaps fantasy - that everyone earns commensurately with what they produce"...
I do?!?! Since when?
"At my last formal job, every hourly employee was paid within 20 cents of minimum wage"...
Obviously you should've gotten another job or acquired a job skill that was in higher (means pays better) demand...
"So I am absolutely not buying the theory that people are paid what they are worth"...
It may be a theory to you but in the real world people generally are paid what they're worth to the people they are working for...
You have to remember that the wage you are being paid is NOT the total cost to your employer for your employment...
If its not fair to YOU, go somewhere else where you will be appreciated more...
"Employee performance varied widely, yet all were paid within a narrow twenty-cent range. (Some employees were well worth twice minimum wage and some weren't even worth minimum.)"...
How much of that situation is foisted onto companies by government oversight? Have you heard of the E.E.O.C.?
"However, from a tax standpoint, the low-wage worker contributes substantially more by being underpaid than he contributes by being paid an appropriately higher wage"...
What does this mean and do you have something credible to back it up?
"What the worker loses by being underpaid, is gained by the employer in the form of profits, which are almost invariably taxed at a higher rate (thereby generating more tax revenue) than the employee's wages"...
On which planet and in what solar system?
When tax rates are in the stratosphere, as was the case when Kennedy took office, under those circumstances it made sense to cut taxes. However, when marginal tax rates are already low, the Laffer Curve suggest that further tax cuts will lead to reduced tax revenue.
Was I asleep for the last eight years or haven't we already gone down this tax cut road before? Supply side? we already have plenty of supply and slack capcity in the economy. The problem we face is low aggregate demand. We need demand side stimulus.
Darth Accountant
Don't forget to add the hundreds of other taxes that did not exist 50 years ago.
I think that in this discussion there is too much focus on income taxes alone, particularly Federal ones, and too much focus on revenue. On top of those Federal rates you have State, and sometimes local income taxes, sales taxes, gas taxes, property taxes, license fees, etc., etc.
A deficit can be caused by three things, either a sudden drop in revenue, too little revenue, or too much spending. Since the US federal budget has consistently run into the red, boom or bust, regardless of revenues, regardless of party in charge, then I would lean towards too much spending. It's very simple, as soon as any form of surplus materializes, rather then putting it towards paying down debt, politicians spend it on buying votes or on some new program that they can hang their name on.
Just about every Western country has downsized their government in some way at some point, they had no choice. The US never has downsized is in fact moving in the opposite direction, both in program spending and in government regulation.
The US federal government has run up more debt since 1970 then it has in it's entire existence. It is now spending more money then ever, borrowed money, in effect it is printing money, hundreds of billions worth.
At some point the foreign creditors will cut up the credit card and call in the loans. Some would say that the US is too "big" to fail, where have we heard that before? GM? Fannie Mae? AIG?
So what should be done? Leave Federal income taxes where they are for now, including the Bush ones. Bring in some outside accounting firms to conduct a full review and audit of all Federal spending. Make these audits available for public viewing. Start cutting, take those savings and put them toward paying down debt first, and reallocate the rest to something useful like repairing infrastructure, or building power plants. When they end up with some savings in debt servicing costs they they can cut or eliminate some of the other taxes. Encourage State and local governments to do the same.
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