In the video above from August 13, 1962, when the highest marginal individual income tax rate was 91% and the highest marginal corporate tax rate was 52%, early supply-sider President John F. Kennedy announced his plan to introduce permanent, across-the-board tax cuts for both individuals and corporations. Kennedy argued that both “logic and equity” demanded tax relief for Americans, and that the dollars released from taxation would create new jobs, new salaries, and spur economic growth and an expanding American economy, thereby creating more tax revenues.
Kennedy’s supply-side tax cuts were passed, and by 1964 the top personal tax rate was 77%, dropping further to 70% in 1965. In 1965, the corporate tax rates were reduced to 22% and 48%, from previous rates of 30% and 52%. The Kennedy tax cuts did help expand the economy, resulting in a 106-month economic expansion during the 1960s, which was the longest expansion in US history until the 120-month expansion from 1991-2001. During that tax-cut-fueled economic expansion in the 1960s, real GDP growth averaged 5%, with growth as high as 8.5% in two quarters. US payrolls increased by 32% during the 1960s, the highest growth in jobs by far of any decade during the postwar period. Government tax revenues grew by 65% from 1965 to 1970.
Even though President Kennedy’s supply-side approach with across-the-board cuts in tax rates was incredibly successful at generating economic growth and jobs, and increasing both middle-class prosperity and tax revenues, all we ever seem to hear about today is the alleged post-war prosperity of the 1950s, and a recurring class warfare approach of raising taxes on the wealthy to bring down the deficit and reduce rising income inequality.
Or as Larry Kudlow explains it in his latest column “Obama Skips the Kennedy Tax Cuts,” the success of Kennedy’s supply-side cuts in marginal tax rates in the 1960s has been “rubbed out” and replaced by a “liberal vision of powerful unions and high tax rates on the rich.” Here’s Larry:
Speaking in Galesburg, Ill., this summer, Obama served up a convenient historical fairy tale: “In the period after World War II, a growing middle class was the engine of our prosperity.” Presumably he was thinking of a time when high taxes on the rich and industrial-union rule had the middle class soaring. The trouble is, Obama’s history is wrong.
From 1944 to 1960, with a top tax rate of 91 percent, the U.S. economy expanded at an anemic 2.1% annual pace. And during the Eisenhower years, the economy grew at a subpar 2.4% yearly rate, including three recessions.
But then came the 1960s, the decade liberals love to hate. Why? Because the path-breaking supply-side tax cuts of John F. Kennedy generated one of the greatest booms in economic history.
Conveniently, John Kennedy’s powerful tax-cut slashing on business, individuals, and investors doesn’t exist in the Left’s post-war, economic narrative. It’s been rubbed out of history, replaced by a liberal vision of powerful unions and high tax rates on the rich, which is supposed to create growth. And expectedly, Obama and the Left never make the connection between the Kennedy tax cuts and the Reagan tax cuts 20 years later, which essentially copied the JFK model.
Not only did Reagan copy JFK’s across-the-board rate reduction, he even dusted off his rhetoric. Reagan frequently talked about a rising tide lifting all boats, after-tax incentives to keep more of what you earn, and how lower tax rates produce higher tax revenues. In fact, Reagan credited Kennedy when the 1980’s tax cuts got the economy moving again.
When President Obama talks about a grand bargain for corporate tax reform to raise more revenues to be used for more stimulus spending, or a budget that would end the sequester and its budget caps and stick it to the well to do with a near $1 trillion tax hike, he completely skips the Kennedy-Reagan growth story. Even accounting for his huge policy differences with JFK and Reagan, Obama should do us all the courtesy of getting his history straight.
