Thursday, March 14, 2013

President Coolidge and the Laffer Curve

Mises Daily: Thursday, March 14, 2013 by John P. Cochran
Amity Shlaes has been busy promoting her new biography Coolidge and in the process is making a strong argument for real tax and budget reform as a foundation for increased sustainable market driven prosperity. She made the case very strongly in her Hillsdale College lecture of January 27, 2013, “Calvin Coolidge and the Moral Case for Economy.”
Shlaes discussed the “‘scientific taxation’—an early formulation of the Laffer Curve” advanced by Coolidge and his Treasury Secretary Andrew Mellon. Coolidge argued against higher tax rates, saying, “Experience does not show that higher rates produces larger revenue. Experience is all the other way. When the surtax on incomes of over $300,000 and over was but 10 percent, the revenue was about the same as it was at 65 percent.”
Coolidge was truly interested in reducing the footprint of government on the economy, and thus had wise reservations about using rate cuts simply as a tool to expand revenues, as would later be advocated by supply-sider believers in the Laffer Curve. According to Shlaes,
… so much so that he considered foregoing [emphasis original] the rate cuts: “While I am exceedingly interested in having a tax reduction … it can only be brought about as a result of economy,” he said at one point. He would not put tax cuts before budget reductions [emphasis mine] insisting in twining the two goals.”
Rothbard, writing in 1982, in his introduction to the fourth edition” to America’s Great Depression (xviii-xix) strongly echoed Coolidge’s insistence on spending cuts accompanied by tax rate cuts as a tool to shrink government and to expand liberty and prosperity: .....To Read More…..

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