Tax Reform Experiments By President Coolidge And Secretary Mellon

The tax cuts and tax reform experiments by President Coolidge and Secretary Mellon had significant impacts on both the national economy and taxpayers themselves. In the year 1920, the rate of the highest tax bracket sat at 73%, and the lowest at 4% (Lowest and Highest Tax Brackets and Tax Rates: 1920-1928). This was largely to pay off debts owed from World War l. But, as the country was being returned to normalcy after the war, Coolidge and Mellon took this as an opportunity for tax reform. They believed that the high tax rates were hurting the US citizen more than they were helping him, and thus an era of tax reformation was born.

Coolidge and Mellon believed high tax rates were harmful to the economy. They believed that lowering taxes may increase revenue to the government, as it had been noted that less revenue had been brought in each year with the high tax rates of the time. It was also believed that lowering tax rates would reduce the cost of living, and this would help to stimulate the economy as it would promote trade and commerce (Taxation: The People’s Business, Chapter 1). Lower tax rates were also believed to help businesses flourish, expand, and become more productive (Speech of Andrew Mellon, October 11, 1928). Coolidge and Mellon believed that lowering the then-high tax rates would have a positive

Coolidge said in his inaugural message, “We cannot finance the country, we can not improve social conditions, through any system of injustice, even if we attempt to inflict it upon the rich,” (1925 Inaugural Message). He believed that while taxation was an economic issue, it was also a moral issue. A significant amount of hard-earned money was being removed from each citizen’s paycheck, and Coolidge believed the amount taken was discouraging and limiting to the taxpayer, and sought to change