John F. Kennedy Quotes
Our true test is not between tax reduction on the one hand and the avoidance of Federal deficits on the other. It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget—just as it never will produce enough jobs or enough profits.
Kennedy, with great Republican support proposed a reduction of the top income tax rate from 91% to 65%, reduction of the bottom rate from 20% to 14%, and a reduction in the corporate tax rate from 52% to 47%. That put the tax rates at the appropriate level. Economic growth was reasonable until President Reagan’s military spending cold war strategy produced huge deficits, Clinton raised the tax rates slightly and had the best economic growth ever, and had a balanced budget. George W. Bush lowered taxes had much slower growth and even larger deficits. However, by 2013 all hints of bipartisanship were gone. The Republicans claimed that the then tax rates were much too high—the highest income tax was half the rate that most agreed in 1962 was the right rate. And the corporate tax was 35 %, far lower than the Kennedy rate of 47% and incredibly lower when we consider that with deductions that were then in force the average corporate tax was only 12% the lowest since the Great Depression. Meanwhile the 2008 Bush Economic Meltdown and the Great Recession it produced the highest deficits in history with the lowest taxes in modern times and much of the polarized population demanding further tax cuts and an equal number demanding increased tax revenue.
John F. Kennedy, 1917-1963, 35th President of the United States (Democrat, MA), Speech, Economic Club of New York, 1962
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This was a typical argument in the 2012 battle between President Obama and the Republican conservatives. However, this was written 35 years earlier, when the exact same issue was polarizing politicians. The idea for taxing the rich more to reduce the deficit has been around since there was a Federal deficit. On most occasions the rich had enough political clout to avoid additional taxes for them and get the general public to pay instead of them. However, there have been times where they have not been able to avoid increased taxes. The New Deal lead by Franklin Delano Roosevelt and the Obama administration in 2013 were two such exceptions.
The Laffer curve was a mathematical, economic curve supposedly showing the relationship between tax rate and government revenue from taxes. In Laffer’s version of this curve, as interest rates go down, revenue from taxes goes UP because according to Laffer, there will be much more economic activity if taxes are lowered. In reality this has happened rarely in certain countries and in a very narrow range of tax deduction. As Chretien observes if you lower the tax rate to zero according to the Laffer curve this should maximize revenue but obviously it does not because with a zero rate there are no taxes collected even if the economy is booming. The Laffer curve was ideologically popular with those politicians wanting to lower taxes, but it never stood up to serious analysis and never worked in practice as Chretien observes. As a result, some people refer to the curve as the Laughter curve.
John Fitzgerald Kennedy, often referred to by his initials JFK, was an American politician who served as the 35th president of the United States from 1961 until his assassination in 1963. Kennedy served at the height of the Cold War, and the majority of his work as president concerned relations with the Soviet Union and Cuba. A Democrat, Kennedy represented Massachusetts in both houses of the U.S. Congress prior to becoming president.
