Scientific Taxation

While Andrew Mellon and presidents Warren G. Harding and Calvin Coolidge are rightly credited with proposing and shepherding through Congress tax reform legislation in the 1920s that radically reduced marginal tax rates on wealthy individuals from WW I highs, it is less well known that a similar change very likely would have occurred even under Democratic administrations. Basically, the Mellon plan was originally authored by former and holdover Treasury officials from the Wilson administration, who fully intended to formulate a permanent peacetime taxation system that would best serve a modern industrial society.

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Coolidge on taxes

In a statement given at the 7th meeting of the Business Organization of the Government on June 30, 1924, Calvin Coolidge laid out a few basic principles that are well worth remembering today, even if our situation is vastly different (for one thing, he points out elsewhere in the speech that “We are often reminded that we are in the best financial condition of any of the great powers, and we are” — which was true at the time but very likely is not true anymore today).

“There is a most urgent necessity for those who are charged with the responsibility of government administration to realize that the people of our country can not maintain their own high standards, they can not compete against the lower standards of the rest of the world, unless we are free from excessive taxes.

With us economy is imperative. It is a full test of our national character. Bound up in it is the true cause, not of the property interests, not of any privilege, but of all the people. It is preeminently the source of popular rights. It is always the people who toil that pay. (…)  Public service is entitled to a suitable reward. But there is a distinct limit to the amount of public service we can profitably employ. We require national defense, but it must be limited. We need public improvements, but they must be gradual. We have to make some capital investments, but they must be certain to give fair returns. Every dollar expended must be made in the light of all our national resources, and all our national needs.”

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