A History of U.S. Taxes - The Political Discussion
 

A History of U.S. Taxes —
The Political Discussion
By: Patricia T. Henssler, C.P.A.
The Henssler Financial Group Position Paper

The Hensler Financial Group Wealth ManagementWhen talking about numbers and taxes, it is hard to talk about facts. There are always people who see the glass half empty when I see it half full. Of course, there are those that have a half dozen when I have only six.

My gleanings from reading about fifty different articles, with all sorts of political slants, did boil down to what I think of as "facts:"

The 1920s

  • During the administrations of Harding and Coolidge, tax rates were slashed from the confiscatory levels they had reached in WWI. The Acts of 1921, 1924, and 1926 reduced the top rate from 73% to 25%.
    • Spurred in part by lower tax rates, the economy expanded dramatically. In real terms, the economy grew 59% between 1921 and 1929, and annual economic growth averaged more than 6%.
    • Notwithstanding (or perhaps because of) the dramatic reduction in tax rates, personal income tax revenues increased more than 61% from 1921 to 1928 (a period of no inflation).
    • The share of the tax burden borne by the rich rose dramatically. Taxes paid by those making $50,000 and up in those days climbed from 44% of the total tax burden to 78% by 1928.
The 1930s
  • Herbert Hoover raised tax rates from 25% to a maximum of 63%. Franklin Roosevelt boosted them to 79%.
    • The 1930s are not remembered as one of the American economy's better decades.

The 1960s

  • President Kennedy proposed a series of tax rate reductions in 1963 that resulted in legislation the following year dropping the top rate from 91% in 1963 to 70% by 1965.
    • The Kennedy tax cuts helped trigger the longest economic expansion in America's history. Between 1961 and 1968, the inflation-adjusted economy expanded by more than 42%.
    • Tax revenues grew strongly, rising by 62%; adjusted for inflation they rose by one-third.
    • Just as in the 1920s, the share of the income tax burden borne by the rich increased.

Did You Know:

According to data from the IRS, the top 1% of income earners pay nearly 35% of the income tax burden; the top 10% pay 65%; and the top 25% pay nearly 83%. The bottom 50% of income earners pay barely 4% of income taxes. (The "reality" is it is impossible to cut taxes without the so-called rich receiving a share of the benefits.)

Lady Godiva was one of the first tax protesters. She lived in England during the 11th century. According to legend, Lady Godiva's husband Leofric, Earl of Mercia, promised to reduce the high taxes he levied on the residents of Coventry when she agreed to ride naked through the streets of the town, which she did. If you would like further information regarding this topic or any other tax related issue, please contact The Henssler Financial Group Tax & Accounting Division at 770-428-4025.

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