Profiles in Tax Cuts: Presidents in Tough Times
Dec. 9, 2010— -- President Obama is not the first president to mete out big tax cuts, and he will likely not be the last. Though the White House's extension of the Bush tax cuts are largely viewed by Democrats as too big a compromise, the president defended it on Tuesday, insisting "it's a good deal for the American people."
Measured against tax deals of presidents past, Obama's move is in many ways par for the course. History shows that when the going gets tough, the president cuts taxes. Daniel Mitchell, an economist with the Cato Institute, put it another way.
"As a general rule, the American people don't like taxes, and when the economy's weak especially, there's a demand to help the economy by reducing the tax burden," said Mitchell.
The great historical tax cuts belong to just a trio of presidents: Kennedy, Reagan and Bush.
Progressive tax rates in the United States date back to the 19th century, when Congress enacted the nation's first income tax law – The Revenue Act of 1862 – to support the Civil War effort. Like today's modern tax structure, the Civil War taxes were graduated: a person earning more than $600 per year was taxed 3 percent, those earning more than $10,000 were taxed 5 percent.
Fast forward to the biggest presidential tax acts in recent history: John F. Kennedy's Revenue Act of 1964, Ronald Reagan's Economic Recovery Act of 1981 and Tax Revenue Act of 1986, and George W. Bush's Economic Growth and Tax Relief Reconciliation Act of 2001 and Job Growth Tax Relief Reconciliation Act of 2003.
Kennedy: The First Cut Is the Deepest
Before Kennedy stepped in, the tax rate for the wealthiest Americans was a staggering 91 percent – a number that would send today's top earners fleeing for Switzerland in droves. Rate reductions, also known as the Kennedy Tax Cuts drove that number down to 70 percent.
