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Milton J. Madison - An American Refugee Now Living in China, Where Liberty is Ascending

Federalism, Free Markets and the Liberty To Let One's Mind Wander. I Am Very Worried About the Fate of Liberty in the USA, Where Government is Taking people's Lives ____________________________________________________________________________________________ "Extremism in defense of liberty is no vice. Tolerance in the face of tyranny is no virtue." -Barry Goldwater-

Saturday, July 23, 2011

The case for lower marginal rates.....

a. "It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now ... Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus." ~ Nov. 20, 1962, president's news conference

b. "Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government." ~ Jan. 17, 1963, annual budget message to the Congress

c. "In today's economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarges the federal deficit – why reducing taxes is the best way open to us to increase revenues. It is no contradiction – the most important single thing we can do to stimulate investment in today's economy is to raise consumption by major reduction of individual income tax rates." ~Jan. 21, 1963, annual message to the Congress: "The Economic Report Of The President"

d. "Our tax system still siphons out of the private economy too large a share of personal and business purchasing power and reduces the incentive for risk, investment and effort – thereby aborting our recoveries and stifling our national growth rate." ~ Jan. 24, 1963, message to Congress on tax reduction and reform

e. "A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues." ~Sept. 18, 1963, radio and television address to the nation on tax-reduction bill
Economist Arthur Okun was the economic architect of this policy. But its also important to understand that marginal tax rates were outrageously high at 91% and there were tons of built in tax avoidance schemes that diverted resources to investments that were not particularly productive. Remember that people respond to high marginal tax rates by changing their behavior and also respond to the potential higher rates and change their behavior in anticipation of higher rates..

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