Fox News' Bill O'Reilly is urging President Obama to follow President John F. Kennedy's footsteps and propose lowering taxes for the rich to spur economic growth. But during Kennedy's term, the top marginal tax rate stood at 91 percent and his proposal would have lowered it to 65; whereas, the top marginal rate today is a historically low 35 percent.
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O'Reilly Urges Obama To Emulate Kennedy Tax Proposal For Rich Taxpayers
O'Reilly: "In 1962, President Kennedy Proposed A Big Tax Cut For The Rich In Order To Stimulate The Economy." O'Reilly said on his Fox News show:
O'REILLY: We have been closely analyzing the terrible economic situation in this country: Dow down almost 400 today. And there's no question that President Obama's big-government management solutions aren't working. Also, the tax-the-rich mantra -- a ruse. There's simply not enough people in the entire country to make a dent in the federal debt no matter how much you take from them.
O'REILLY: I'm standing for Americans with common sense, people who understand that under a Democratic Congress, the nation racked more than $5 trillion in debt in just four years, even as the economy tanked. So, I and many others have come to the conclusion that the liberal tenet of taxing the rich and spending like Arab Sheiks may not be the solution to fixing a moribund economy.
O'REILLY: Now, I do seem to remember Floyd The Barber and Goober grousing about a 90-percent income tax rate, but it is a myth. The top tax rate in the 1950s peaked at 92 percent. But nobody actually paid anything close to that. In fact, in 1951, the handful of Americans -- we're talking maybe 200 making more than a million dollars a year -- paid about 62 percent. Onerous, to be sure.
But in 1962, President Kennedy proposed a big tax cut for the rich in order to stimulate the economy and encourage investment. And the rates have been moderating ever since. [Fox News, The O'Reilly Factor, 9/22/11]
But During Kennedy's Time, The Top Marginal Tax Rate Was 91 Percent
Kennedy Called For Lowering Top Marginal Income Tax Rate From 91 Percent To 65 Percent. From Kennedy's January 14, 1963, State of the Union address:
Now, when the inflationary pressures of the war and the post-war years no longer threaten, and the dollar commands new respect -- now, when no military crisis strains our resources -- now is the time to act. We cannot afford to be timid or slow. For this is the most urgent task confronting the Congress in 1963.
In an early message, I shall propose a permanent reduction in tax rates which will lower liabilities by $13.5 billion. Of this, $11 billion results from reducing individual tax rates, which now range between 20 and 91 percent, to a more sensible range of 14 to 65 percent, with a split in the present first bracket. [University of Virginia Miller Center, accessed 9/23/11]
Top Marginal Tax Rate Was Lowered To 70 Percent In 1965. In 1964, the top marginal income tax rate was lowered from 91 percent to 77 percent. In 1965, it came down to 70 percent. [Tax Policy Center, 1/31/11]
Whereas The Top Marginal Tax Rate Is Now At 35 Percent
The Top Marginal Tax Rate Is Currently 35 Percent. The top marginal income tax rate has been 35 percent since 2003. [Tax Policy Center, 1/31/11]
Indeed, Federal Taxes Are At "Historically Low Levels"
CBPP: The Median Family's Federal Income Taxes Are "Lower Than In Any Year Since 1955 ... Except For 2009." A report updated by the Center on Budget and Policy Priorities (CBPP) on April 15 found that "[m]iddle-income Americans are now paying federal taxes at or near historically low levels." From the report:
Middle-income Americans are now paying federal taxes at or near historically low levels, according to the latest available data. That's true whether it comes to their federal income taxes or their total federal taxes.
- Income taxes: A family of four in the exact middle of the income spectrum will pay only 4.7 percent of its income in federal income taxes this year, according to a new analysis by the Urban Institute-Brookings Institution Tax Policy Center. This is the third-lowest percentage in the past 50 years, after 2008 and 2009.
- Overall federal taxes: Middle-income households are paying overall federal taxes -- which include income as well as payroll and excise taxes -- at or near their lowest levels in decades, according to the latest data from the Congressional Budget Office (CBO).
This year and last, the Making Work Pay tax credit, which President Obama and Congress enacted as part of the 2009 American Recovery and Reinvestment Act, is providing a credit of $800 to married joint filers ($400 to single filers). A median-income family with two children thus will receive an $800 tax cut in the return it files this year.
With the Making Work Pay tax credit, the median family's federal income taxes will equal just 4.7 percent of its income in 2010. That is lower than in any year since 1955 (the first year for which these data are available) except for 2009, when taxpayers also received the Making Work Pay credit, and 2008, when another stimulus-related tax cut was in effect.
The post also included the following chart illustrating the average federal income tax rate since 1955:
[Center on Budget and Policy Priorities, 4/15/11]
Former Reagan Adviser Bartlett: As Percentage Of GDP, "Federal Taxes Are At Their Lowest Level In More Than 60 Years." Bruce Bartlett, former adviser to President Reagan and Treasury Department economist under George H.W. Bush, wrote in a May 31 post on the New York Times blog Economix:
Historically, the term "tax rate" has meant the average or effective tax rate -- that is, taxes as a share of income. The broadest measure of the tax rate is total federal revenues divided by the gross domestic product.
By this measure, federal taxes are at their lowest level in more than 60 years. The Congressional Budget Office estimated that federal taxes would consume just 14.8 percent of G.D.P. this year. The last year in which revenues were lower was 1950, according to the Office of Management and Budget.
The postwar annual average is about 18.5 percent of G.D.P. Revenues averaged 18.2 percent of G.D.P. during Ronald Reagan's administration; the lowest percentage during that administration was 17.3 percent of G.D.P. in 1984.
In short, by the broadest measure of the tax rate, the current level is unusually low and has been for some time. Revenues were 14.9 percent of G.D.P. in both 2009 and 2010.
The truth of the matter is that federal taxes in the United States are very low. There is no reason to believe that reducing them further will do anything to raise growth or reduce unemployment. [The New York Times, 5/31/11]
Bartlett: "[F]ederal Taxes Are Very Considerably Lower By Every Measure Since Obama Became President." In a March 19, 2010, post on Forbes.com, Bartlett wrote that "federal taxes are very considerably lower by every measure since Obama became president. And given the economic circumstances, it's hard to imagine that a tax increase would have been enacted last year." Bartlett continued:
In fact, 40% of Obama's stimulus package involved tax cuts. These include the Making Work Pay Credit, which reduces federal taxes for all taxpayers with incomes below $75,000 by between $400 and $800.
According to the JCT, last year's $787 billion stimulus bill, enacted with no Republican support, reduced federal taxes by almost $100 billion in 2009 and another $222 billion this year. The Tax Policy Center, a private research group, estimates that close to 90% of all taxpayers got a tax cut last year and almost 100% of those in the $50,000 income range. For those making between $40,000 and $50,000, the average tax cut was $472; for those making between $50,000 and $75,000, the tax cut averaged $522. No taxpayer anywhere in the country had his or her taxes increased as a consequence of Obama's policies. [Forbes.com, 3/19/10]
And Economic Circumstances In The 1960s Were Different Than Today
Economist Ed Lotterman: "Economic Times Have Changed Since JFK." Rebutting failed Senate candidate Linda McMahon's (R-CT) invocation of Kennedy to argue for extending the Bush tax cuts, economist Edward Lotterman wrote that "Kennedy entered office with the nation's finances in good shape." Lotterman continued:
Yes, the debt-GDP ratio would fall further until it hit its low point of 32.6 percent at the end of the Carter administration. But with a deficit of only 0.6 percent of GDP for the 1961 fiscal year in which JFK took the oath of office, there was room for additional spending or for tax cuts.
Kennedy knew little about economics and did not hold strong views, relying instead on his economic advisers. These, headed by Minnesota's Walter Heller and including two future Nobelists, James Tobin and Robert Solow, were dyed-in-the-wool Keynesians.
That is, they favored increasing government spending and cutting taxes during a recession. But it also meant they wanted higher taxes and reduced spending when a recession was over.
Kennedy called for a tax cut because his Keynesian aides advised him to at a time when the national debt was declining in relative terms and when budget deficits were low. No one knows what he would do now. [Bismarck Tribune, 10/10/10]
Kennedy Nephew: U.S. Economy Was Very Different When President Kennedy Proposed Lowering Taxes. In September 2010, the AP reported that Edward M. Kennedy Jr., a nephew of the late president, wrote to McMahon asking her to pull a campaign ad in which she used a video excerpt of a 1963 speech by Kennedy to advocate for tax cuts. In the letter, Kennedy wrote that McMahon "distorts the legacy of President Kennedy in order to mislead voters into thinking" he would have supported her position on tax policy, adding:
In 1963, there was virtually no deficit and the top tax rate was 91 percent for income over $400,000. Today, the annual U.S. deficit is nearly $1.5 trillion and the top tax rate is 35 percent for income over $372,500." [The Associated Press, 9/22/10]
Robert Schlesinger: Kennedy's Advocacy For Tax Cuts Was About "A Very Specific Circumstance." In U.S. News & World Report, opinion editor Robert Schlesinger wrote:
The notion of Kennedy as supply-side forerunner is a powerful myth, but it is a myth. Context is key. Conservatives love to quote a speech Kennedy gave at the Economic Club of New York in December 1962. Here's one quote -- I've italicized the crucial part often left out: "Our present tax system, developed as it was, in good part, during World War II to restrain growth, exerts too heavy a drag on growth in peace time; that it siphons out of the private economy too large a share of personal and business purchasing power; that it reduces the financial incentives for personal effort, investment, and risk-taking."
JFK was not expounding an implacable economic philosophy; he was speaking about a very specific circumstance. The top marginal tax rate was 91 percent, which JFK wanted reduced to a "more sensible" 65 percent. Compare that with today's 35 percent top rate, and ask: If supply-siders are so enamored of JFK's tax policies, would they advocate a return to a "more sensible" 65 percent top rate? Applying Kennedy's tax talk to the current structure, JFK biographer Robert Dallek says, is like comparing "apples and watermelons." [U.S. News & World Report, 1/26/11]