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Altrius Capital Blog

Tax Cuts as the Centerpiece of Polical Strife.

Posted by James Russo on May 5, 2017

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For nearly a hundred years, tax cuts have been a centerpiece of political strife among politicians, with both parties at times lobbying for lower tax rates.

An accepted belief has been that lower taxes widen the Federal deficit and provide no economic expansion. Contrary to this belief, prior tax cuts enacted by various presidential administrations have actually yielded economic growth and higher revenues for the Federal Government.

During the 1920’s, tax rates were lowered from over 70% to less than 25%, resulting in an increase in tax revenue from $719 million in 1921 to over $1.1 billion in 1928.

Following the dramatic tax increases during the 1930’s imposed by President Hoover and President Roosevelt, Democratic President John F. Kennedy enacted across the board tax reductions. The reductions of the early 1960’s brought top tax rates down from 90% to 70%, while simultaneously increasing tax revenue from $94 billion in 1961 to $153 billion in 1968.

The historic tax reform act of 1986, signed by President Reagan, reduced rates across all income levels and nearly doubled tax revenue by 99.4 % during the 1980’s.

The top marginal Federal tax rate has fluctuated from a low of 7% in the early 1900’s to 91% during the 1950’s. Over the past 104 years, the average top marginal tax rate has been approximately 57.9%.

I certainly wouldn’t hazard to guess what any potential legislative changes to tax policy will be or even if tax reform will even be enacted.  However, corporate and individual tax reform would clearly be beneficial to corporate profits and the economy and I remain hopeful that the Republican controlled Congress and President are able to find enough common ground to pass thoughtful reform in order to improve our economy.

 Sources: Heritage Foundation, IRS, Tax Policy Center

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Topics: tax reform, tax cuts

Written by James Russo

Founder & Chief Investment Strategist