The tax cuts across the board, that President Harding used in the 1920s were very successful. The tax cuts of the ‘20s as well as every major income tax cut resulted in an effective shift of the tax burden from lower to higher income taxpayers. Economic growth in the ‘20s surged with the tax cuts and the unemployment rates averaged about 4 percent.
How can it be that a reduction in tax rates puts more money in the treasury? A surplus in the treasury allowed the government to reduce the debt by 25 percent. Most of you have heard of the Roaring Twenties, and the tax cuts were certainly a big part of what made it possible.
What caused the economic disaster of the 1930s? Could it be government meddling in the free market? In 1929, the Smoot-Hawley Tariff Act was being debated in Congress and President Hoover said that he would sign the bill. While the tariff may not have been the full cause of the Depression, it certainly did not make things any better. Smoot-Hawley did nothing to foster trust and cooperation among nations in either the political or economic realm during perilous times.
In the mid- and late-20s, the money was flowing freely and folks were borrowing money to invest in the markets — another case of greed just like the dot-com bubble and the housing bubble. Central banking advocates sell an illusion of monetary stability. A central bank can easily over expand or over contract the stock of money and credit. Canada did not have a central bank. Smoot-Hawley escalated the tariff barrier between Canada and the United States, yet Canada did not experience any bank failures or bank runs and their money supply declined by only 13 percent versus 29 percent in America. There is every reason to believe that a free banking system most likely would have prevented the disguised inflation of the 1920s and averted the geographical vulnerabilities along with the open secondary deflation characteristics of the 1930s.
Many of the world’s industrialized countries have scrambled to cut their corporate tax rates to stay competitive in the face of the economic crisis. The United States is not among them. Recently, the U.S. became the industrialized nation with the highest statutory corporate tax rate.
There is no doubt that our tax code is a total nightmare and needs to be fixed. Liberals have a one track mind — tax the rich. How about cut spending about 5 percent across the board and put a stop to government employees spending on lavish seminars and parties? How about cutting spending on projects, like the one called “Did Jesus Die for Klingons Too?” It only cost $100,000. That is only one among many wasteful nonsense adventures. Let us have real spending cuts, not just a reduction in proposed spending. When government says cut spending, they only intend to slow it ever so slightly.
The flat marginal rate income tax may never be enacted. The tenacity with which supporters of the progressive tax rate cling to this idea is indicative of their redistributionist philosophy. It also shows their refusal to face reality.
Richard Feuilly is a guest columnist. He is a retired ditch digger and a resident of Weatherford.