1961 tax cuts inspired 1985 closing of tax loopholes
In 1985, Democrats introduced a bill that would reduce tax rates, especially the top rate in exchange of loophole closing. It was an attempt to complete what John F. Kennedy had initially inspired to. In 1961, Kennedy introduced his tax cut plan as a
package containing the elimination of loopholes. His advisor coined the term, "tax expenditures" to describe special carve outside the code that necessitated higher rates on everyone else. In the 1960s Kennedy only got the rate cuts, not the loophole
expenditure closing. In the 1980s, A powerful cadre of congressional Democrats would get both.
Reagan was gleeful. In his 1986 State of the Union address, Reagan urged the American people to get behind the effort, and he cited Kennedy. As Reagan said
before Congress that night, "The most powerful force we can enlist is an ever-expanding American economy, undone more to spur a spirit of risk taking and help America's economy break free than any program since Kennedy's tax cut."
1963: Our tax system siphons too much out of private economy
JFK in a 1963 message to Congress on tax reduction and reform states: "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."
Similarly, in 1963 radio and television address to the nation on his tax reduction bill,
President Kennedy stated: "A tax cut means higher family income and higher business profits and a balanced federal budget. Every tax payer 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."
FactCheck: JFK lowered top income tax rate from 91% to 65%
Rush Limbaugh said on his radio show on Oct. 12: "JFK made the case for tax cuts as a means of growing the economy. JFK, a Democrat, is advocating tax cuts in the same sense that Arthur Laffer always has.
Rush referred to this 1962 speech by Pres.
Kennedy, pledging "across-the-board, top-to-bottom cut in personal and corporate income taxes" for the purpose of stimulating the economy.
Rush seems to have a case. But in fact, the top marginal tax rate in 1962 was 91% and JFK proposed lowering the
top rate to 65% (compared to a top rate of 37% today). Similarly, the corporate tax rate in 1962 was 52% and JFK proposed lowering it to 47% (compared to a corporate rate of 15% today).
In the context of the much higher rates in 1962, cutting tax rates
meant something very different than today--Rush presumably knew that context, and hence was lying about JFK's proposal. No politician of any party today would even consider RAISING tax rates to the LOWER levels proposed by JFK in 1962!
1962: Paradoxically raise revenues by cutting tax rates
President Ronald Reagan said, "The more government takes in taxes, the less incentive people have to work. If, on the other hand, you reduce tax rats and allow people to spend or save more of what they earn, they'll become more industrious; they'll have
more incentive to work hard, and money they earn will add fuel to the great economic machine that energizes our national progress. The result: more prosperity for all--and more revenue for government."
Reagan wasn't the only president who understood that lower taxes yield higher revenues by unleashing economic growth and job creation. To many Democrats' chagrin, Reagan was merely echoing the economic thoughts of President
John F. Kennedy, who had already said, in 1962, "The paradoxical truth is that the tax rates are too high today and tax revenues are too low and the soundest way to raise revenues in the long run is to cut rates now."
President Kennedy knew high taxes were putting people out of work. Taxes got so high people couldn't afford to buy much of anything.
Companies couldn't sell their products, so people got laid off and other people never got hired. --Campaign flyer (Ingram Library, West Georgia College) 1978
Source: Quotations from Speaker Newt, by A.&P. Bernstein, p. 81
, Jan 1, 1995
1961: We need tax cut to keep drive from running out of gas
His effort was not how to divide the economic pie but how to enlarge it for everyone. Helping business profits led to more jobs. Helping consumer income led to more sales. When presented, it was a tax reform and tax reduction bill. When it was finally
reported out [of the House], he had his major tax cut bill with a little tax reform. More reforms, he agreed, were overdue, but they could not even pass committee.
The President went on television once again. He illustrated how the bill would reduce th
taxes of a typical family, and how their tax savings would be used to create more jobs. Ten thousand new jobs had to be created every day; recessions have occurred on the average every 44 months since World War I. "We need a tax cut to keep this present
drive from running out of gas." The speech was a success and so was the bill. The Kennedy tax bill, enacted with the help of his successor, and the unparalleled period of expansion stand as a monument to his economic wisdom and political tenacity.
In Nov. 1963, Kennedy said, "First we'll have your tax cut; then we'll have my expenditures program." He remarked to me, "The time has come to organize a national assault on the causes of poverty, a comprehensive program, across the board"; this, he
suggested, would be the centerpiece in his 1964 legislative recommendations. Between the tax reduction and the war against poverty, Kennedy believed that he had finally put together the elements of a total program for economic growth and opportunity.
Source: 1000 Days, by Arthur Schlesinger, p.842
, Jan 1, 1965
Lower top income tax rate from 91% to 65%
I shall propose a permanent reduction in tax rates which will lower liabilities by $13.5 billion. Of this, $11 billion results from reducing individual tax rates, which now range between 20% and 91%, to a more sensible range of
14% to 65%, with a split in the present first bracket. $2.5 billion results from reducing corporate tax rates, from 52%--which gives the Government today a majority interest in profits--to the permanent pre-Korean level of 47%.
This is in addition to the more than $2 billion cut in corporate tax liabilities resulting from last year's investment credit and depreciation reform.
OnTheIssues NOTE: The actual tax rates from the resulting US Revenue
Act of 1964 were 70% top personal rate (compared to a 37% top rate in 2012) and 48% corporate tax rate (compared to a 15% corporate rate in 2012).
Source: State of the Union speech
, Jan 14, 1963
Obsolete tax system drags on private employment
America has enjoyed 22 months of uninterrupted economic recovery. But recovery is not enough. If we are to prevail in the long run, we must expand the long-run strength of our economy.
To achieve these greater gains, one step, above all, is essential--
the enactment this year of a substantial reduction and revision in Federal income taxes. For it is increasingly clear that our obsolete tax system exerts too heavy a drag on private purchasing power, profits, and employment. Designed to check inflation
in earlier years, it now checks growth instead.
I shall propose a permanent reduction in tax rates which will lower liabilities by $13.5 billion. Of this, $11 billion results from reducing individual tax rates, which now range between 20% and 91%, to a
more sensible range of 14% to 65%. $2.5 billion results from reducing corporate tax rates, from 52%--which gives the Government today a majority interest in profits-to the permanent pre-Korean level of 47%.
Cut personal & corporate taxes to stimulate economy
This administration pledged itself last summer to an across-the-board, top-to-bottom cut in personal and corporate income taxes to be enacted and become effective in 1963. I am not talking about a quickie or a temporary tax cut which would be more
appropriate if a recession were imminent. Nor am I talking about giving the economy a mere shot in the arm to ease some temporary complaint. The federal government's most useful role is not to rush into a program of excessive increases in public
expenditures, but to expand the incentives and opportunities of private expenditures.
When consumers purchase more goods, plants use more of their capacity, men are hired instead of laid off, investment increases, and profits are high. Corporate tax
rates must also be cut to increase incentives and the availability of investment capital. The government has already taken major steps this year to reduce business tax liability and to stimulate the modernization of our productive plant and equipment.
Source: Speech at the New York Economic Club, New York City
, Dec 14, 1962
Apply withholding requirements to dividends & interest
Last year, 1961, despite rising production and demand, consumer prices held almost steady--and wholesale prices declined. This is the best record of overall price stability of any comparable period of recovery since the end of World War II.
Our first line of defense against inflation is the good sense and public spirit of business and labor--keeping their total increases in wages and profits in step with productivity.
I am submitting for fiscal 1963 a balanced Federal Budget.
This is a joint responsibility, requiring Congressional cooperation on three sources of income in particular:
An increase in postal rates, to end the postal deficit;
Passage of the tax reforms previously urged, to remove unwarranted tax
preferences, and to apply to dividends and to interest the same withholding requirements we have long applied to wages; and
Extension of the present excise and corporation tax rates, except for those changes affecting transportation.