Among the issues most commonly discussed are individuality, the rights of the individual, the limits of legitimate government, morality, history, economics, government policy, science, business, education, health care, energy, and man-made global warming evaluations. My posts are aimed at intelligent and rational individuals, whose comments are very welcome.

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"Observe that the 'haves' are those who have freedom, and that it is freedom that the 'have-nots' have not." Ayn Rand

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02 March 2009

Treasury Secretary Andrew Mellon

Treasury Secretary Andrew Mellon served under President Coolidge and published a book called Taxation: The People's Business in the early 1920s. My source for information on this is Amity Shlaes' book The Forgotten Man, 2007. At that time, income taxes were only paid by the very rich, but they were very, very high. The top rate was 73%!!!! Mellon believed the rate was too high and prevented investment and job creation. He proposed in his book that lowering the tax rates would result in more revenue for the government. He thought over-taxation was un-American.

"Any man of energy and initiative in this country can get what he wants in life. But when initiative is crippled by legislation or by a tax system which denies him the right to receive a reasonable share of his earnings, then he will no longer exert himself and the country will be deprived of the energy on which its continued greatness depends."

"High taxation, even if levied upon an economic basis, affects the prosperity of the country because in its ultimate analysis the burden of taxes rests only in part upon the individual or property taxed. It is largely borne by the ultimate consumer."

Mellon had the high income tax rates cut and the economy grew handsomely. So too did the government's revenue, allowing the government surpluses.

This process was repeated under Presidents Kennedy, Reagan, and George W. Bush. They cut tax rates and watched government revenues increase. The amount of revenue the government gets from taxes depends on the tax rate, the frequency with which the government tax is paid, and the amount of money or value upon which it is paid. If a lower tax rate results in more taxable transactions or an increase in the size of the taxable transactions, then the government revenue from a tax may go up even with a tax rate cut.

It is very clear that what we need now to create investment and jobs is a very broad-based tax cut program. We should not be stingy in giving tax cuts to investors. The result would be the same that it has been the 4 times it was tried in the 1900s. Investment would increase, unemployment would go down, and government revenues would go up.

What is not to like about this? Why are we not doing this again? Because class warfare is the name of the Democrat game and they are determined to punish the wealthy and those with high incomes, even if it is a case of cutting off the American nose to spite itself. High taxes are about punishment and about control, not about doing anyone any good. If the Democrats wanted to do good for the poor, they would cut taxes and allow investors to create more jobs for the poor. They would also reduce or eliminate the minimum wage which only kills jobs for the low-skilled worker. These actions would create more government revenue to use for programs for the poor as well. But, this is clearly not their priority.

The Democrat priority is to hurt the able and the hardworking and to exercise control over their lives. It is not to help anyone, especially not those with lower incomes.

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