Monday, July 13, 2015
Amity Shlaes takes a cue from the Washington Nationals, who recently introduced "Silent Cal" (Coolidge) as a mascot, and compares the economic policies of our thirtieth President to those of his predecessor and successor. Specifically, she notes that lower income taxes spurred prosperity and speculates on why:
... A government that cut tax rates sent a positive signal to business, saying in effect: "We will stay out of your way." Coolidge certainly agreed, labeling excessive taxation "legalized larceny."This advocate of limited government sees the data as a two-edged sword. Reducing tax rates on the way to abolition of taxation will have the added benefit of hastening a diminution of our sovereign debt. At the same time, without an attempt at informing the public of the moral case against taxation (and for proper limits on government) a la Mellon's book, momentum can be lost as conditions improve, and we'll be ripe for future generations to slide right back down the slippery slope to serfdom as Shlaes notes FDR did.
Harding, [Andrew] Mellon and Congress cut the top rate to 58%. And that might have been end of it, for Harding proved more interested in other projects. But Harding died suddenly in 1923.
Tax cuts suited Coolidge's dry New England temperament, and he took to the project with grim determination. Mellon, glad to have an energetic partner, rallied and in April 1924 published a book, Taxation: The People's Business, to share with the public the administration theories.
Mellon and Coolidge formed a sort of relay team, and together managed to bully a skeptical Congress into lowering the top rate to 46%. Not stopping there, Coolidge and Mellon agitated further. In 1926 Congress passed a law that lowered the capital gains rate to 25%.
Anxious, the pair pored over the tax data to see if their theory of strong revenues after rate cuts held up. In 1923 the federal government took in $662 million in income tax. The next year the figure was $704 million, and the next, $735 million. By the late 1920s, revenues topped $1 billion. The progression upward was uneven, but impossible to deny. [minor format edits]
Incidentally, Coolidge's talk of "excessive" taxes concedes the premise that taxation is just fine, and also reminds me of modern conservatives who complain only of over-regulation.