President Kennedy’s Best Accomplishment?

by Burt on November 19, 2013

Not the Vietnam War, where he eased us into sending more troops. Not civil rights, which he did not accomplish and only supported reluctantly. The answer: Cutting tax rates!

Kennedy did support tax cuts, and those cuts improved the prosperity of the 1960s. Here is the story.

In the late 1950s, under President Eisenhower, and in the early 1960s, the U.S. had slow economic growth and high unemployment. President Kennedy, facing almost 7% unemployment in 1961—his first year in office—decided to support cutting income tax rates across the board, from the richest to poorest taxpayers. The wealthiest Americans, for example, who had been paying 91% on all income over $200,000, were refusing to invest in the U.S. economy. That was stopping growth and shutting down the chance to work for millions of Americans who wanted to get jobs, support their families, and climb the ladder of success.

“Our true choice,” Kennedy said, “is not between tax reduction, on the one hand, and the avoidance of large federal deficits on the other.” He believed that cutting tax rates would actually increase federal revenue as well as spark new employment. Kennedy proposed cutting the top rate to 70% and the bottom rate from 20 to 14% in order to “boost the economy, produce revenues, and achieve a future budget surplus.” Kennedy’s idea that cutting tax rates would increase revenue as well as jobs—which is called “supply-side economics” today—was counterintuitive, but, when his plan was enacted after his death, the results Kennedy predicted came to pass.

Kennedy’s tax rate cuts gave businessmen incentives to invest, and gave their workers more money to keep and spend on their own. The annual economic growth rate rose from 4.3 to 6.6% four years after the tax cuts. Unemployment steadily dropped year after year during the 1960s from 6.7% in 1961 to 3.6% in 1968. Two million more Americans had jobs in 1968 than had them in 1961. Those newly employed Americans now had the chance, as the Declaration of Independence said, to “pursue happiness.” The right to life, liberty, and the pursuit of happiness—in Kennedy’s view—meant that government had no business confiscating 91% of a rich person’s income, and thus depriving workers of a chance to find jobs in the rich man’s factory.

Finally, after the Kennedy tax rate cuts, revenue to the U.S. government from income taxes climbed from $49 billion in 1964 to $69 billion in 1968, a big jump from what the government had received in revenue in the years before the tax cuts. In other words, the U.S. was cutting its annual deficit as well as creating jobs for its people.

President Kennedy, whose death fifty years ago we commemorate, showed the nation that when people are free to keep much of what they earn, their creative energy will generate wealth, products, and jobs that will help keep America the land of the free. We salute President Kennedy.

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