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How Even Scholars Misread 90 Years Of Tax-Cut History
IBD Editorials ^ | July 19, 2011 | The great THOMAS SOWELL

Posted on 07/19/2011 4:34:13 PM PDT by Kaslin

The arguments of the proponents and opponents of tax-rate reductions have been arguments about two fundamentally different things:

(1) The distribution of existing incomes and existing tax liabilities.

(2) Incentives to increase incomes by reducing tax rates, so as to get individuals and institutions to take their money out of tax shelters and invest it in the economy.

Proponents and opponents of tax-rate reductions not only had different arguments, they were arguments about very different things, and the two arguments largely went past each other untouched.

Empirical evidence on what happened to the economy in the wake of those tax cuts in four different administrations over a span of more than 80 years has also been largely ignored by those opposed to what they call "tax cuts for the rich."

Confusion between reducing tax rates on individuals and reducing tax revenues received by the government has run through much of these discussions over these years.

Famed historian Arthur M. Schlesinger Jr., for example, said that although Andrew Mellon, secretary of the treasury from 1921 to 1932, advocated balancing the budget and paying off the national debt, he "inconsistently" sought "reduction in tax rates."

Nor was Schlesinger the only highly regarded historian to perpetuate economic confusion between tax rates and tax revenues. Today, widely used textbooks by various well-known historians have continued to misstate what was advocated in the 1920s and what the actual consequences were.

According to the textbook "These United States" by Irwin Unger, Mellon, "a rich Pittsburgh industrialist," persuaded Congress to "reduce income tax rates at the upper-income levels while leaving those at the bottom untouched."

Thus "Mellon won further victories for his drive to shift more of the tax burden from the high-income earners to the middle and wage-earning classes."

(Excerpt) Read more at investors.com ...


TOPICS: Business/Economy; Culture/Society; Editorial; Government
KEYWORDS: sowell; thomassowell

1 posted on 07/19/2011 4:34:14 PM PDT by Kaslin
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To: jazusamo

Ping


2 posted on 07/19/2011 4:34:56 PM PDT by Kaslin (Acronym for OBAMA: One Big Ass Mistake America)
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To: Kaslin
"Scholars" stop being scholars when they stop being objective and allow their own biases, no matter their origins, to take over their objectivity.
3 posted on 07/19/2011 4:36:32 PM PDT by cranked
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To: Kaslin
those people share a very similar vision of the world and treat its conclusions as axioms rather than as hypotheses that need to be checked against facts.

The same can be said for this administrations foreign as well as it's economic policy.

God bless Mr. Sowell, he sure would have a place in my administration.

4 posted on 07/19/2011 4:45:41 PM PDT by tet68 ( " We would not die in that man's company, that fears his fellowship to die with us...." Henry V.)
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To: Kaslin

Did Dr. Sowell use, “even,” when he meant, “especially?”


5 posted on 07/19/2011 4:52:51 PM PDT by nickcarraway
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To: Kaslin; abigail2; Amalie; American Quilter; arthurus; awelliott; Bahbah; bamahead; Battle Axe; ...
Thanks for the ping, Kas.

*PING*
Thomas Sowell

Photobucket - Video and Image Hosting

Recent columns
Dissecting The Demagoguery About ‘Tax Cuts For The Rich’
Good Things
Forgotten Stars

Please FReepmail me if you would like to be added to or removed from the Thomas Sowell ping list…

6 posted on 07/19/2011 4:55:20 PM PDT by jazusamo (His [Obama's] political base---the young, the left and the thoughtless: Thomas Sowell)
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To: jazusamo

You’re welcome, jaz


7 posted on 07/19/2011 5:01:13 PM PDT by Kaslin (Acronym for OBAMA: One Big Ass Mistake America)
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To: nickcarraway

They really need to cite Mellon. He was an amazing economist. :(


8 posted on 07/19/2011 5:01:24 PM PDT by BenKenobi (Honkeys for Herman!)
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To: All

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9 posted on 07/19/2011 5:02:43 PM PDT by DeoVindiceSicSemperTyrannis (Want to make $$$? It's easy! Use FR as a platform to pimp your blog for hits!!!)
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To: Kaslin
There is no need to presume that the scholars who wrote these history textbooks were deliberately lying, in order to protect a vision.

I think after many years and much experience we don't have to presume they were lying, because it's pretty obvious that most of these so called scholars were deliberately lying.

10 posted on 07/19/2011 5:15:23 PM PDT by oldbrowser (They're socialists don't call them liberals)
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To: nickcarraway
Did Dr. Sowell use, “even,” when he meant, “especially?”

I assume you are referring to this paragraph?

The results show how unreliable peer consensus can be, even when it is a peer consensus of highly intellectual people, if those people share a very similar vision of the world and treat its conclusions as axioms rather than as hypotheses that need to be checked against facts.

Can't either one be used?

11 posted on 07/19/2011 5:22:41 PM PDT by Kaslin (Acronym for OBAMA: One Big Ass Mistake America)
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To: Kaslin

Yep-—dealt with most of these in both the Melow/Coolidge and Reagan years in my book “48 Liberal Lies About American History.”


12 posted on 07/19/2011 5:23:36 PM PDT by LS ("Castles made of sand, fall in the sea . . . eventually." (Hendrix))
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To: LS

Melow=Mellon. can’t type on a laptop.


13 posted on 07/19/2011 5:24:20 PM PDT by LS ("Castles made of sand, fall in the sea . . . eventually." (Hendrix))
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To: LS

I hope you included a chapter comparing/contrasting the liberal top down vs the conservative bottom up policy.
Those who are ignorant of history are bound to repeat it. Ray Moley, FDR brain trust member wrote of the New Deal:

“the rejection of the traditional Wilson-Brandeis philosophy
that if America could once more become a nation of small
proprietors, of corner grocers and smithies under spreading chestnut
trees, we should have solved the problems of American life. We agreed
that the heart of our difficulty was the anarchy of concentrated economic
po”ver which, like a cannon loose on a frigate’s deck, tore from
one side to another, crushing those in its path. But we felt that the
remedy for this was not to substitute muskets for cannon or to throw
the cannon overboard. We believed that any attempt to atomize big
business must destroy America’s greatest contribution to a higher
standard of living for the body of its citizenry-the development of
mass production. We agreed that equality of opportunity must be preserved.
But we recognized that competition, as such, was not inherently
virtuous; that competition (when it was embodied in an employer who
survived only by sweating his labor, for example) created as many
abuses as it prevented. So we turned from the nostalgic philosophy of
the “trust busters” toward the solution first broached in modern times
by Charles Richard Van Hise’s Concentration and Control.”


14 posted on 07/19/2011 6:12:41 PM PDT by griswold3 (Character is Destiny)
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To: oldbrowser
Another example of and proof that progressives lie. Absolutely anything to further their agenda of destruction of this nation and enslavement of “We the People”.
15 posted on 07/19/2011 6:15:45 PM PDT by W. W. SMITH (Islam is an instrument of enslavement)
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To: LS
Melow=Mellon. can’t type on a laptop.
When I become king I'm going to make all "keyboards" have the flexibility to enable you to type with your hands in comfortable positions - with no need to strain elbows inward, and with the forefingers above, as well as inside, the pinkies.
Since my Magic Mouse is damaged (affecting the left click that many PC users assume that a Mac doesn't even have) I bought a track pad for my iMac since the finger gestures which are supposed to be important on OS 10.7 ("Lion") will require it. So I've been trying to adapt to this newfangled thing . . .

16 posted on 07/19/2011 6:18:45 PM PDT by conservatism_IS_compassion (DRAFT PALIN)
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To: LS
Coolidge does not get his due. He may have been the greatest president this side of Washington. The contrast in policies and results between Harding/Coolidge and Hoover/Roosevelt could not be more different. While you're certainly aware of it, I would suggest others read The Forgotten Depression and then follow up with one or more of your books.
17 posted on 07/19/2011 7:59:19 PM PDT by Entrepreneur (In hoc signo vinces)
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To: jazusamo

“..........who nevertheless insist on reaching conclusions on economic issues.”

Thanks for the ping jaz. Others might have written to the effect of not knowin’ jack, but shootin’ off their mouths...., but NOT Dr. Sowell. He’s a good guy.


18 posted on 07/19/2011 9:21:59 PM PDT by rockinqsranch (Dems, Libs, Socialists, call 'em what you will, they ALL have fairies livin' in their trees.)
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To: Kaslin
I guess there are a couple of fundamentals not understood by those who have never had to cut a payroll check.

You can make profit on margin, or you can make it on volume.

Push for too much margin, volume goes down.

Reduce margin, volume goes up. There is a balance point which is optimal, and we're Taxed Enough Already.

Shift to a flat tax, if need be, and get 40,000,000 more people with skin in the game, or a consumption tax (eliminate the income tax either way), and leave food, primary housing (the shell, not the stuff), medical care, and home-used energy out of it. (Screw prebates and all the bureaucracy that goes with them, just don't tax those things at the point of sale and eliminate all that.)

19 posted on 07/20/2011 3:57:19 AM PDT by Smokin' Joe (How often God must weep at humans' folly. Stand fast. God knows what He is doing.)
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To: Kaslin

Scholars are those too stupid to make a living in the real world!


20 posted on 07/20/2011 4:03:16 AM PDT by dalereed
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To: griswold3

Seriously, read our book. The whole book is that contrast.


21 posted on 07/20/2011 5:51:26 AM PDT by LS ("Castles made of sand, fall in the sea . . . eventually." (Hendrix))
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To: LS; SunkenCiv; neverdem; narses; patton; CholeraJoe; SmithL

Mellon’s budget restraints in the 1920, Kennedy’s tax cuts in the 1960’s, Reagan’s deep cuts in the mid-1980’s, Bush II’s cuts in 2002-2003 ... They ALL led to long economic growth periods and net increases in tax income.

What is much overlooked are the small Soviet tax “cuts” that did the same:

- Under Lenin in the very early 1920’s (before he started the disastrous 5-year plans) that pulled that nation up from the WWI/Revolution stagnation;
- Stalin’s “privatization” and “family vegetable plots” (after the state-caused collectivization famines in 1932-36) were what saved the rest of Soviet Russia from disaster, and what fed it during WWII;
-Khrushchev tax cuts after Stalin’s death restarted a stagnant economy and allowed him to rebuild the Cold War military that threatened the world from 1960 through 1975. Until those cuts, he had little more than the huge rusting WWII weapons, and a handful of nuclear bombs. After? Billions of rubles to design, build (and copy!) the latest new machinery.


22 posted on 07/20/2011 7:56:40 AM PDT by Robert A. Cook, PE (I can only donate monthly, but socialists' ABBCNNBCBS continue to lie every day!)
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To: LS; Entrepreneur; SunkenCiv
The Forgotten Man by Amity Shlaes is a GREAT criticism of the New Deal and the (hidden) socialist backgrounds of most of FDR's “Brain Trust” that controlled it. (Did you know where the 1950's accusation "fellow traveler” came from? )

New Deal, or Raw Deal. continues the economic analysis of Forgotten Man, but shows the depth of the political revenge, class warfare, lies, intimidation, and callous vote-buying strategies that FDR used from 1930-1932 to co-opt and then beat Hoover, then build his empire from 1933 through 1940. (And how all those plans continued failing after Hoover's attempts between 1930 and 1932. Very little after 1940 however.

For a Keynesian viewpoint (that FDR didn't spend enough - vigorously and virtuously “cursing” the 1920’s gold stratgy of Mellon and the British-German-French banking leaders for their plans - read Lord of Finance by Liaquat Ahmed.

23 posted on 07/20/2011 8:10:58 AM PDT by Robert A. Cook, PE (I can only donate monthly, but socialists' ABBCNNBCBS continue to lie every day!)
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To: Kaslin
Best book I've read on the subject. I highly recommend it....

The End of Prosperity: How Higher Taxes Will Doom the Economy--If We Let It Happen [Paperback] Arthur B. Laffer , Stephen Moore, Peter Tanous

24 posted on 07/20/2011 8:14:09 AM PDT by mewzilla (Forget a third party. We need a second one.)
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To: Kaslin; nickcarraway
I assume you are referring to this paragraph? The results show how unreliable peer consensus can be, even when it is a peer consensus of highly intellectual people, if those people share a very similar vision of the world and treat its conclusions as axioms rather than as hypotheses that need to be checked against facts. Can't either one be used?

I assumed he was talking about the title, "How Even Scholars Misread 90 Years Of Tax-Cut History"

25 posted on 07/20/2011 11:02:01 AM PDT by Still Thinking (Freedom is NOT a loophole!)
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To: Still Thinking; Kaslin

Bingo


26 posted on 07/20/2011 11:55:30 AM PDT by nickcarraway
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To: Robert A. Cook, PE

Actually, I would suggest a primary source, “Taxation: The People’s Business” by Andrew Mellon.


27 posted on 07/20/2011 12:09:17 PM PDT by LS ("Castles made of sand, fall in the sea . . . eventually." (Hendrix))
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To: Robert A. Cook, PE

The biggest difference in all those you mentioned was that Harding/Coolidge enforced significant government CUTS and spending actually FELL. So while revenues didn’t grow as they had under Reagan, the economy boomed and we had surpluses EVERY YEAR because the spending side was held down. We call it the “Roaring Twenties.”


28 posted on 07/20/2011 12:11:36 PM PDT by LS ("Castles made of sand, fall in the sea . . . eventually." (Hendrix))
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To: Robert A. Cook, PE; AdmSmith; AnonymousConservative; Berosus; bigheadfred; Bockscar; ColdOne; ...

Thanks Robert A. Cook, PE. JFK’s tax cut involved accelerated depreciation, which was part of the Reagan cuts, and it greased investment in industrial production. Had it not been for JFK’s and LBJ’s “brushfire war” (Kennedyism) in Vietnam, Laos, Thailand, and Cambodia (yes, there were advisors there for years — Senator Kennedy chaired committee hearings on US involvement in places like “Lay-OS” — but escalation started under the Demwits, and really hit their stride ahead of the 1964 election landslide victories), the 1960s probably would have been remembered as an even more prosperous version of the 1950s.


29 posted on 07/20/2011 4:29:24 PM PDT by SunkenCiv (Yes, as a matter of fact, it is that time again -- https://secure.freerepublic.com/donate/)
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To: BenKenobi; Kaslin; oldbrowser; LS; griswold3; SunkenCiv; Clintonfatigued; Entrepreneur; ...
[Mellon] was an amazing economist.

Practically speaking, you're absolutely right, although he never, to the best of my knowledge, had any formal academic credentials in economics, nor published any scholarly works. His practical knowledge was acquired through his banking business activities(?).

Mellon should be considered the founder of supply-side economics in the US. He was advocating cutting marginal tax rates to boost national economic activity when Reagan was still a boy and Arthur Laffer hadn't yet been born (which is not to put down the latter two at all). It's just that Mellon receives absolutely no credit for his contributions, since the lefty media and lefty academia have been controlling the historical message, just as Thomas Sowell points out.

Aside from ideology, leftist historians of that era probably hate Mellon because Franklin D. Roosevelt's administration pursued him relentlessly for tax evasion, a case which fit the template of Roosevelt's class warfare meme very neatly. Mellon won a jury acquittal in his home town of Pittsburgh, but died shortly thereafter. Some say that his death was precipitated by the stress of the trial.

30 posted on 07/21/2011 6:13:57 AM PDT by justiceseeker93
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To: justiceseeker93

Absolutely right. First, Mellon outlined all of Laffer’s “Laffer Curve” concepts a half century before they were put on paper. Second, there is a terrific book on Mellon by David Cannadine that I think will be THE biography. Cannadine aptly defends Mellon on the tax issues and shows him to be a far bigger man than FDR, esp. when it came to donating his art to the nation.


31 posted on 07/21/2011 6:45:00 AM PDT by LS ("Castles made of sand, fall in the sea . . . eventually." (Hendrix))
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To: mewzilla

That’s a book by the same Art Laffer who told Bill Maher he voted for Clinton twice and Obama once.


32 posted on 07/21/2011 6:52:31 AM PDT by Pelham (Islam. The original Evil Empire)
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To: justiceseeker93
If you haven't read Amity Shlaes The Forgotten Man, I would recommend it to you. She covers Mellon's abuse from the FDR regime with depth and concern. It would seem that his pursuit of a good and aging man did lead to his demise.

I detest FDR.

33 posted on 07/21/2011 6:53:06 AM PDT by Aevery_Freeman (White Hetero Able Male (WHAM) a.k.a. NOT Holder's people)
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To: Aevery_Freeman; LS; All
Speaking of Amity Shlaes' The Forgotten Man, I've browsed through it several times without having the time to really get down to reading it thoroughly.

There is one item in the photo glossy section that really speaks volumes about Roosevelt. It's a copy of a letter that he wrote in 1938 to his own IRS commissioner, Helvering, accompanying a check he sent to the IRS for his purported 1937 income tax payment. There were no forms accompanying the letter noted. Instead, Roosevelt - a Harvard alum and attorney - complained to Helvering that because his salary as president apparently had changed with the start of his new term in 1937, it was beyond his mathematical skills to compute how much income tax was owed. So instead he made out a check for an approximate figure which he claimed would account for at least most of what was due.

The point is that Roosevelt knew that the IRS wouldn't be going after him no matter how much he had underpaid by claiming to be arithmetically challenged. He was in effect telling his own IRS that he could pick a number and send in a check for whatever amount seemed right to him. So this is historical proof of his hypocrisy: he was very blase about paying his own taxes, while encouraging his IRS to go after prominent political opponents to humiliate them publicly.

34 posted on 07/21/2011 7:36:02 AM PDT by justiceseeker93
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To: justiceseeker93; Kaslin

Thanks Justice. My father got his Chemical Engineering degree from Carnegie Tech, which was later named Carnegie Mellon - I’m wondering if it is named after Andrew Mellon?


35 posted on 07/21/2011 10:21:21 AM PDT by potlatch
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To: potlatch

Of course, Carnegie Mellon is named after Andrew Carnegie and Andrew Mellon and/or their heirs. They are huge names in the world of philanthropy.


36 posted on 07/21/2011 10:31:34 AM PDT by justiceseeker93
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To: potlatch
It looks that way

From Wikepedia.com

Mellon Institute of Industrial Research

Mellon Institute of Industrial Research, founded in 1913 by Andrew W. Mellon and Richard B. Mellon, merged with the Carnegie Institute of Technology in 1967 to form Carnegie Mellon University in Pittsburgh, Pennsylvania, United States.

http://en.wikipedia.org/wiki/Mellon_Institute_of_Industrial_Research

37 posted on 07/21/2011 10:38:03 AM PDT by Kaslin (Acronym for OBAMA: One Big Ass Mistake America)
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To: justiceseeker93

Thanks, I wasn’t sure about the “Mellon” part. I was born in Carnegie but have lived deep in Texas most all my life, and am not all that familiar with them.


38 posted on 07/21/2011 10:38:10 AM PDT by potlatch
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To: Kaslin

Thanks so much Kaslin, I missed your post earlier! I should have looked it up myself but was being lazy, lol.


39 posted on 07/21/2011 10:56:22 AM PDT by potlatch
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To: potlatch

You’re welcome.


40 posted on 07/21/2011 11:02:10 AM PDT by Kaslin (Acronym for OBAMA: One Big Ass Mistake America)
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To: Kaslin

- And you’re so nice!! :)


41 posted on 07/21/2011 11:10:04 AM PDT by potlatch
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To: potlatch

42 posted on 07/21/2011 11:24:15 AM PDT by Kaslin (Acronym for OBAMA: One Big Ass Mistake America)
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