Opinion Editorial | |
| Wednesday, September 23, 1998 | |
Clinton No Kennedy -- When it Comes to Taxes |
This year marks the 35th anniversary of the death of John F. Kennedy.
In November, Bill Clinton will speak emotionally about the man who, more
than any other, he has idolized and tried to emulate. However, it is safe
to say that in his remarks, Clinton will find few, if any, admiring words
to say about Kennedy's greatest achievement: a massive cut in taxes. Indeed,
Clinton probably will mark the anniversary of Kennedy's tax reduction by
vetoing the tax cut Congress will send him in the next few weeks. Kennedy launched his tax initiative on January 24, 1963, in a special
message to Congress. "It has become increasing clear," he said,
"that the largest single barrier to full employment of our manpower
and resources and to a higher rate of economic growth is the unrealistically
heavy drag of federal income taxes on private purchasing power, initiative
and incentive." Although the federal government was running a large budget deficit, Kennedy
argued that taxes still needed to be cut. Said Kennedy, "As I have
repeatedly emphasized, our choice today is not between a tax cut and a balanced
budget. Our choice is between chronic deficits resulting from chronic slack,
on the one hand, and transitional deficits temporarily enlarged by tax revision
designed to promote full employment and thus make possible an ultimately
balanced budget." Toward this end, Kennedy offered a 7 point tax reduction program that
included a reduction in the top personal income tax rate from 91 percent
to 65 percent and a lowering of the bottom rate from 20 percent to 14 percent,
a cut in the corporate income tax rate from 52 percent to 47 percent, and
a 20 percent decrease in the capital gains tax. In support of the latter
initiative, Kennedy pointed out that the capital gains tax "directly
affects investment decisions, the mobility and flow of risk capital from
static to more dynamic situations, the ease or difficulty experienced by
new ventures in obtaining capital, and thereby the strength and potential
for growth of the economy." Perhaps the most interesting thing about the Kennedy tax cut is that
he put forward his plan with little support from his advisers and against
the strenuous opposition of some. Among the latter was John Kenneth Galbraith,
a Harvard economics professor that Kennedy appointed as ambassador to India.
Galbraith reports that he "weighed in heavily against the action."
Money from the tax cut, he said, will go into the pockets of those who
need it least and "lower tax revenues will become a ceiling on spending." It took real courage for John Kennedy, a liberal Democrat from our most
liberal state, Massachusetts, to propose a permanent reduction in tax rates.
True, many of his advisers did favor an expansionary fiscal policy, but
as Galbraith pointed out this could be accomplished just as well by expanding
government spending rather than cutting taxes. Moreover, given the budget
deficit, Kennedy knew he would come in for severe attack not only from Republicans,
but many in his own party as well. In fact, it is doubtful that the Kennedy tax cut would have passed Congress
had he lived. It was enacted in 1964 mainly out of sympathy in the wake
of his assassination, and because Lyndon Johnson saw it as politically expedient
to ram the tax cut through in order to cement his power. Today, of course, Democrats are more likely to echo Galbraith's arguments
against tax cuts than Kennedy's arguments for them. Indeed, the ink was
barely dry on the House Ways & Means Committee's $80 billion proposed
tax cut last week when Bill Clinton announced his intention to veto it.
Not a very Kennedy-like response. Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis,
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