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Nov 13, 2008

The Historical Lessons of Lower Tax Rates

The Historical Lessons of Lower Tax Rates
11/13/08 - 08/13/03 Heritage.org by Daniel Mitchell

[edited] There is a distinct pattern throughout American history. When tax rates (and marginal rates) are reduced, the economy’s growth rate improves, living standards increase, tax revenues grow, “rich” taxpayers pay a greater share of taxes, and lower income citizens pay a smaller share. This result should lead class-warfare politicians to support lower tax rates.

Conversely, higher tax rates are associated with weak economic performance and stagnant tax revenues. When politicians attempt to “soak the rich,” the rest of us take a bath.

We can look at three United States episodes of tax rate reductions for useful lessons.

  • The tax cuts of the 1920s
  • The Kennedy tax cuts
  • The Reagan tax cuts

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