It was 50 years ago, Larry Kudlow and Brian Domitrovic remind us in the Wall Street Journal, that the president signed one of the 20th century's three great across-the-board tax cuts. That president was Lyndon Johnson.
He was seeing through the proposal of his predecessor, John F. Kennedy, to cut the income tax rate dramatically. The bottom rate fell from 20% to 14%. The top rate went from 91% to 70%. This was the work of Democrats in the presidency and in Congress, Kudlow and Domitrovic write, reminding us that once Democrats knew tax cuts do wonders for an economy:
"Today tax cuts are associated with the Republican Party. Yet half a century ago, it was the Democratic President Kennedy who said in his Dec. 14, 1962, address to the Economic Club of New York: "Our practical choice is not between a tax-cut deficit and a budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy; or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues, and achieve--and I believe this can be done--a budget surplus. The first type of deficit is a sign of waste and weakness; the second reflects an investment in the future.' "
Kennedy was right: Reducing the burden of taxes leads to growth. Kudlow and Domitrovic write:
"The tax legislation of 1964 was one of three major across-the-board income-tax cuts in the 20th century. The others took place in the 1920s, during the Warren Harding and Calvin Coolidge administrations, and in 1981 and 1986 during the Ronald Reagan administration. After the Tax Reform Act of 1986, the top marginal rate was all of 28%. Today it is 39.6%.
"The 1920s, '60s and '80s were three of America's greatest decades of economic growth. Without them, growth since the inauguration of the income tax in 1913 averages less than 3% per year. Each of the tax-cut decades saw at least seven years of growth of 4%-5%, along with advances in entrepreneurship, employment, living standards and wealth. We would hardly speak of an "American century' if not for the economic expansions that came with these three historic tax cuts."
Most crucially, they write, high tax rates do not help "the little guy." Rather, they "encourage lobbying for loopholes, special carve-outs and backroom deals. Nothing populist about that."
It's a lesson President Obama should heed. Nearly 11 million Americans are unemployed, and millions more have simply given up so that the share of Americans in the work force has fallen to Carter-era levels. Yet the president raised income-tax rates on the vast majority of small businesses and will not consider lowering them. President Obama says he's looking for broadly share prosperity. Maybe he should see how two presidents of his own party achieved that 50 years ago.