Monday, February 22, 2010

Conservative Tax Policies

Historically, raising taxes during times of slow or negative economic growth has had disastrous effects on our countries financial well-being. Reducing tax burdens on American citizens have repeatedly helped to insure swift recovery and return prosperity to our financial systems. This is precisely why we should promote more conservative tax policies.
Dating back to the 1920s it has been evident that lower tax rates for top marginal income earners have fueled economic growth. These tax cuts not only propeled economic growth, they dramatically increased the income tax revenue paid in to the federal government.
In the early 1920s the top marginal income tax rates hovered around 70 percent. It was not until 1925 that President Coolidge slashed these rates to 25 percent. Ironically, during this period of tax relief, revenue generated through the federal income tax nearly doubled. This phenomenon was due in large part to the economic boom promoted by the Coolidge tax cuts. While unemployment numbers decrease, and production levels increase, it created an expansion in the number of people paying in to the income tax system, thus generating higher levels of revenue.
The worst economic time period in U.S. history occurred throughout the 1930s. The Great Depression produced unemployment numbers as high as 30 percent. Coincidentally it was in the early 30s that Coolidge’s tax cuts were allowed to expire. In 1932 the top marginal rates were returned to 63 percent. These tax increases arguably prolonged the length and severity of The Great Depression. It was not until the manufacturing boom created by World War Two that we were able to return to economic prosperity.
In the early 1960s, Americans in the top marginal bracket were paying a staggering 91 percent of their earnings to the federal government. In 1963, President Kennedy proposed slightly more manageable rates around 70 percent. These proposals passed through the house and were eventually put into place. Even the more progressive politicians could agree that the obscene tax policies put fourth in the decades prior had been a constant drag on our economy.
A couple of decades later, in the 1980s, we saw first hand the economic benefits created by reintroducing more conservative tax policies. In 1980, when Ronald Reagan was elected president, the United States was again experiencing a stagnant financial market. While experiencing double digit inflation and unemployment numbers not far behind, Reagan proposed drastic tax cuts across the board. The top marginal rates, which were 70 percent in 1981, underwent a series of rollbacks, stopping eventually at 28 percent in 1n 1988. There are no questions these tax cuts were an unyielding impetus to economic growth. Almost immediately, soaring inflation and unemployment were returned to sustainable levels. During the eight years of the Reagan Presidency there was a creation of nearly 20 million jobs.
Today we face a host of new challenges. In these times of uncertainty, consumers appear hesitant to spend extra money. While any extra cash flow goes into savings, or towards debt retirement, the government is franticly trying to figure out an effective way of stimulating the economy. Relieving Americans or their partial tax obligations would be a practical way of reigniting the engines in this country’s economy. Instead, bailouts and rescue packages totaling hundreds of billions of dollars in deficit spending all but insure future tax increases.
An increase in the tax burden during slow and uncertain times could potentially delay a swift economic recovery. It is easy to say, “We should raise taxes on the rich, so what if they can’t afford their yachts and sports cars any more.” This raises an interesting argument. If the wealthy can’t afford to buy yachts any more, what happens to the yacht factory? What happens if the small business owner considering hiring some help is faced with an elevation in his/her capital gains taxes? Might he/she reconsider whether hiring help is an affordable option? I don’t mean to belabor the point, but the fact is, when money is siphoned from a functioning free market economy, it makes growing the economy seem hopeless.
As Americans, I believe we should stand up to the federal government and elect more fiscally conservative politicians. It’s not a revenue problem Washington faces, it’s a spending problem. Until we get this spending under control, the economy will always face some degree of uncertainty.



  1. Good point Steve! As a fellow Rieken, hopefully I’ve earned an opinion! For example, look at the Foshay Tower -one of our favorite hot spots, completed construction in 1929! ;D 1925 to 1931 – the highest marginal tax rate was 25%...

  2. Incredible article, Steve!

  3. Awesome work.Just wanted to drop a comment and say I am new to your blog and really like what I am reading.Thanks for the share