1924 Calvin Coolidge - Tax Freedom Day

Tax Freedom Day 2015 was on April 24th.  This is the day that Americans worked enough to pay the more than $4.8 trillion dollars in federal, state and local taxes.   Yep, we worked about 1/3 of the year for the government.   How did we get here?   It was because of the ignorance of the average tax payer who was ignorant of the actual taxes he paid.  In 2018, Tax Freedom day was April 19th, and the total tax bill was $5.2 billion.

In October of 1924, the New York Times revealed that John D. Rockefeller Jr had topped the list of taxpayer in Manhattan.  Rockefeller paid more than $7 million dollars in taxes in 1923.   In 1923, tax payments were made public records, and this made for great newspaper stories.  President Calvin Coolidge argued that releasing this information was not only detrimental to the public welfare, but "bound to decrease public revenues".  He urged that it should this law be repealed.

You see, Coolidge understood in 1924, as today, that big government, meant higher cost of government, and that higher costs, meant higher taxes.   But when the average person compared their taxes to those of the rich, it gave the impression that the rich and wealthy were footing the bill.  Thus, why should the middle and lower classes care about the cost of government?  Let that be the responsibility of those who pay higher taxes. Coolidge set out to prove that fallacy wrong.   He explained, that there is no system ever devised which allowed any person living in this country to "escape being affected by the cost of our government".   The cost of government has a "direct effect both upon the rate and the purchasing power of wages".   It increases the prices we pay for food, clothing, fuel, and shelter.   The cost of government can come from only once source, that is the work of the people.  The higher the cost of government, the longer the people must work for the government, rather than for themselves.

"The fallacy of the claim that the costs of government are borne by the rich and those who make a direct contribution to the National Treasury can not be too often exposed. No system has been devised, I do not think any system could be devised, under which any person living in this country could escape being affected by the cost of our government. It has a direct effect both upon the rate and the purchasing power of wages. It is felt in the price of those prime necessities of existence, food, clothing, fuel and shelter. It would appear to be elementary that the more the Government expends the more it must require every producer to contribute out of his production to the Public Treasury, and the less he will have for his own benefit. The continuing costs of public administration can be met in only one way -- by the work of the people. The higher they become, the more the people must work for the Government. The less they are, the more the people can work for themselves."

Coolidge continued to explain that anyone can reduce taxes, but it is not so easy to reduce benefits and the cost of government.  Coolidge's plan to reduce taxes, was to reduce the cost of government.   He was presenting a budget, that if Congress could stay within the budget, then a moderate tax reduction will be possible.  Furthermore, a moderate tax reduction would mean more income available for investments which in turn would raise revenue for the government.  It was this cycle of lower taxes through reduced government spending that "would so encourage and stimulate investment that it would firmly establish our country in the economic leadership of the world."

"Anybody can reduce taxes, but it is not so easy to stand in the gap and resist the passage of increasing appropriation bills which would make tax reduction impossible. It will be very easy to measure the strength of the attachment to reduced taxation by the power with which increased appropriations are resisted. If at the close of the present session the Congress has kept within the budget which I propose to present, it will then be possible to have a moderate amount of tax reduction and all the tax reform that the Congress may wish for during the next fiscal year. The country is now feeling the direct stimulus which came from the passage of the last revenue bill, and under the assurance of a reasonable system of taxation there is every prospect of an era of prosperity of unprecedented proportions. But it would be idle to expect any such results unless business can continue free from excess profits taxation and be accorded a system of surtaxes at rates which have for their object not the punishment of success or the discouragement of business, but the production of the greatest amount of revenue from large incomes. I am convinced that the larger incomes of the country would actually yield more revenue to the Government if the basis of taxation were scientifically revised downward. Moreover the effect of the present method of this taxation is to increase the cost of interest. on productive enterprise and to increase the burden of rent. It is altogether likely that such reduction would so encourage and stimulate investment that it would firmly establish our country in the economic leadership of the world."

References

Presidency.ucsb.edu. (2018). Calvin Coolidge: Second Annual Message. [online] Available at: http://www.presidency.ucsb.edu/ws/index.php?pid=29565 [Accessed 16 May 2018].

Bernasek, A. (2018). The Debate Is Back: Should Tax Returns Be Public?. [online] Nytimes.com. Available at: http://www.nytimes.com/2010/02/14/business/yourtaxes/14disclose.html?_r=0 [Accessed 16 May 2018].

Tax Foundation. (2018). Tax Freedom Day® 2015 is April 24th - Tax Foundation. [online] Available at: http://taxfoundation.org/article/tax-freedom-day-2015-april-24th [Accessed 16 May 2018].


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