Income Tax Cuts Work Every Time

President Warren Harding proposed income tax cuts, which his successor, Calvin Coolidge, implemented after Harding’s death. The result was the prosperous period known as the Roaring Twenties. President John Kennedy proposed income tax cuts that were implemented by his successor, Lyndon Johnson, after Kennedy’s death, which contributed to the relative prosperity of the 1960s. President Ronald Reagan signed tax cuts into law, which produced one of the lengthiest peacetime expansions in U.S. history in the 1980s. President George W. Bush reduced taxes, which contributed to another period of economic prosperity in the 2000s.

In short, significantly reducing income tax rates, especially the highest rate on the highest income earners, promotes economic growth. The reason is not just because income earners get to keep more of their income, but because they have the incentive to work more than they would if income tax rates are too high, especially if the rates exceed 50%, and also to invest.

Income tax cuts are also good fiscal policy because each time federal income income taxes were reduced, federal revenue actually increased because of the increase in economic growth, despite the lower tax rate.