The hero of Waterloo was the Duke of Wellington, but the hero of the peace that followed was a Whig member of Parliament, Henry Brougham, who led the charge in 1815 for abolition of the income tax. Don't do it, said the conventionally wise; we have a 915-million-pound debt to pay off.
But Brougham (say "Broom") and his allies did it anyway. Business got its stimulus, and the tax revenues poured in, reducing the debt considerably and starting a 60-year bull market for the empire. It's "the way the world works," as in the title of Jude Wanniski's 1978 book. (Berwyn library has it, FYI.) You don't always generate more tax revenues with higher tax rates. If you think you do, Wanniski has an extended economic and historical argument to help you get over it, including chapter and verse on this British case.
AMERICAN TAXES ... Meanwhile, across the Atlantic, taxation had been crucial in costing the empire one of the jewels in its crown, when Americans found their situation revolting and broke from the mother country. The new nation, burned by the tax man as a colony, taxed itself little in its early years and paid off its national debt by 1830, relying entirely on customs duties.
On the other hand, the 157-year-old nation over a century later embarked on a sequence of economic misadventures that had high taxes as their centerpiece. Franklin D. Roosevelt kept Herbert Hoover's unprecedentedly high excise taxes, taking a bad situation and making it worse, and pushed income taxes higher than ever. Economic doldrums continued.
KENNEDY ... Another Democrat, John F. Kennedy, saw past the tax-rate mirage. The tax cuts he proposed in 1963 and Lyndon Johnson pushed through in 1964 reduced the top tax rate from 91 percent to 70 percent, and tax revenues nearly doubled in the ensuing four years. Ronald Reagan cut taxes in the mid-1980s, and revenues grew accordingly.
"An economy hampered by restrictive tax rates ... will never produce enough jobs or enough profits," said JFK, who called it a "paradoxical truth that ... the soundest way to raise the revenues in the long run is to cut the tax rates now."
OBAMA ... Does Obama get this? If he does, why was he surprised to hear from the ABC anchorman about the inverse proportion of capital-gains rates to revenues? And why did he say he'd raise those rates anyhow, "for purposes of fairness"? And discussing tax rates with Joe the Plumber, why on earth did he say he wants to "spread the wealth around," as if that's what taxes are for?
He may not have known he was echoing Huey Long, the Louisiana senator whom Roosevelt tried to match blow for blow with soak-the-rich legislation and tax increases. "Malefactors of great wealth," FDR called them, and he may even have meant it. Who knows? And Obama may even mean things he says, and who knows about that?
We have to ask in any case how much the zeal for taxing the rich is geared to satisfy the envious rather than to pay the government's bills. And we must ask if we can afford our envy. You hit big money where it lives, and it rolls into a ball like an armadillo, protecting itself. The investor invests not. Few jobs are created. It's a shame, I know, but that's how it is. Politicos speak of the patriotic duty to pay taxes. I'd rather hear them speak of their duty to lower them.
