Myth vs Facts
posted at 11/22/2013 10:54 AM EST
MYTH: Raising taxes in the 1990s caused the boom years of that decade. This proves that raising taxes leads to economic growth.
FACT: Tax cuts, not tax hikes, caused the boom years of the 1990s. The economy grew modestly after Clinton raised taxes in 1993, but the economy grew even more after Clinton signed the tax cuts that were passed by the Republican-controlled Congress under Newt Gingrich’s leadership in 1997.
MYTH: JFK’s tax cuts were more responsible than Reagan’s or Bush’s. They were aimed at the middle class and didn’t help the rich.
FACT: JFK cut taxes more than Reagan did. JFK’s tax cut was larger than the Reagan tax cuts and any single Bush tax cut compared with national income, and it was larger than all three Bush tax cuts combined in relation to the federal budget. In addition, JFK gave a huge tax cut to the rich.
MYTH: Lower tax rates don’t cause economic growth.
FACT: Even JFK understood that lower tax rates produce economic growth and even higher tax revenue.According to President Kennedy:
Our true choice is not between tax reduction, on the one hand, and the avoidance of large federal deficits on the other. It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget — just as it will never produce enough jobs or enough profits. Surely the lesson of the last decade is that budget deficits are not caused by wild-eyed spenders but by slow economic growth and periodic recessions, and any new recession would break all deficit records.
In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now. The experience of a number of European countries and Japan have borne this out. This country's own experience with tax reduction in 1954 has borne this out. And the reason is that only full employment can balance the budget, and tax reduction can pave the way to that employment. The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus. (http://www.americanrhetoric.com/speeches/jfkeconomicclubaddress.html)
MYTH: Government borrowing and spending spurs economic growth.
FACT: JFK rejected the idea that we can borrow and spend our way out of tough economic times. Instead, he argued for tax cuts, including corporate tax cuts:
But the most direct and significant kind of federal action aiding economic growth is to make possible an increase in private consumption and investment demand — to cut the fetters which hold back private spending. In the past, this could be done in part by the increased use of credit and monetary tools, but our balance of payments situation today places limits on our use of those tools for expansion. It could also be done by increasing federal expenditures more rapidly than necessary, but such a course would soon demoralize both the government and our economy. . . .
The final and best means of strengthening demand among consumers and business is to reduce the burden on private income and the deterrents to private initiative which are imposed by our present tax system — and 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. . . .
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, replacement, and expansion of our productive plant and equipment. (http://www.americanrhetoric.com/speeches/jfkeconomicclubaddress.html)
It’s also worth noting that when John F. Kennedy served in Congress as a Representative and later as a Senator, he voted for an across-the-board cut in federal spending in 1950, for raising the annual personal income tax excmption by a whopping 16.5% in 1954, for a $6 billion dollar tax cut in 1958, for reducing taxes on small corporations in 1958, and spoke out against raising taxes on rural electric cooperatives in 1960.