Calvin Coolidge was president from 1923 until 1929. He left office with a smaller budget than when he began. His secret was a budget. He met with his budget committee almost weekly during his entire term. During that budget cutting era America enjoyed jobs growth and economic expansion. Coolidge was known as the ‘No’ president. Sometimes ‘no’ is the right answer. Parents say no to their children, congress should say no to constituents.
Coolidge also recognized a phenomenon that would later be illustrated in the Laffer Curve, a representation of the elasticity of tax rates. Coolidge said, “Experience does not show that higher tax rates produces larger tax revenue. Experience is all the other way.” Coolidge was successful in lowering the top tax rate to 25%, tax revenues increased, and a budget surplus was the result.
Most important to note is that Coolidge recognized that lower taxes takes the government out of the way of the people, and the people, properly inspired and encouraged, will grow the base on which taxes are assessed.
President Kennedy later recognized the same phenomena and is famously quoted as saying, “It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now … Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.”
So, with all this evidence to support the fact that lower taxes result in higher tax revenues, one must wonder why so many legislatures continue to promote higher taxes. Do they want more revenue or more control?