Saturday, June 30, 2018

Herbert Hoover and the largest tax increase in American History

I like how the constant harping and carping about tariffs these days gets invoked together with fearmongering about Smoot Hawley and the Great Depression. What is missing? The Revenue Act of 1932. After the 1929 crash there was a small tax cut, but this was overshadowed by Smoot Hawley just months later. In the middle of bad economic times, you simply don't raise taxes, and yes, a tariff is a tax. But let's get to the meat of the numbers, shall we?

The Revenue Acts of 1918 and 1921 had a top tax rate of 73%.

The Revenue Act of 1924 reduced this to a top tax rate of 46%.

The Revenue Act of 1926 reduced this again to a top tax rate of 25%.

It was not raised from this number until The Revenue Act of 1932, which had a top tax rate of 63%. This was lower than the ninteen-teens tax rates of 73%, but considering the jump of 25% to 63%, this is over a 100% increase and it indeed was at the time the largest peacetime tax increase in American history.

But that is not what we received in 2017. For all its flaws, the 2017 Tax Cuts and Jobs Act does a reverse-Hoover by lowering taxes. I can explain; there is a certain formula here:

1929: poor economy, raising tariffs, largest tax increase in American history. (From what I can tell, they were not lowering burdensome regulations in 1929 either)

2017/2018: decent economy, raising tariffs, lowering taxes as well as lowering regulation.

See the stark differences here? Most of the time we hear that these tariffs should not exist and they will only lead to trade wars and other issues. But in reality it is the 16th amendment which should be repealed. The only thing they get correct when talking about this issue is that a mixture of income taxes and tariffs is a deadly combo. They should not be mixed. But it isn't the tariffs which should be eliminated, it is the income tax which should die a horrible and bloody death.

The Founding Fathers used tariffs as the only (or at least main) form of taxation, and that is probably the most proper way of taxation. The irony of tariffs is that they are in general taxes only on the rich - the problem is that it does not grant the kind of authoritarian domestic controls that income taxes bring, which is really what the progressives love and seek.

Even with taxes, the issue is not actually the issue. For progressives, control is the issue and control is always the real issue. Everything else is merely window dressing. It's always been about control and it has been this way going back to 1906 when income taxes were first proposed by the president in his SOTU that year. It's all about control.

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