Connection clear between tax cuts, growth

Ralph Martire's recent column "Lessons of history don't speak well for supply-side tax reform" didn't tell you what has historically happened to the economic growth rate immediately following tax rate changes. I will tell you.

The income tax was created in 1913 and the economy immediately contracted then stayed flat through the rest of that decade as tax rates increased.

In the 1920s, tax rates were reduced and "the roaring 20s" ensued when GDP growth averaged 4.2 percent.

The 1930s saw multiple tax rate increases including the Smoot-Hawley Tariff Act and income tax increases under Hoover then FDR. We all know about the decadelong Great Depression. (Hmm, might there be a connection?)

JFK campaigned on rate cuts and the reductions he proposed were passed in 1963 triggering a period of high economic growth peaking at 8.5 percent annually.

Effective tax rates rose during the 1970s because high inflation pushed wage earners into higher tax brackets that were not indexed for inflation. The government didn't raise taxes directly but inflation did and the 70s was characterized by stagnant economic growth.

Reagan tax cuts began in 1981 and the economic growth rate reached as high as 7.8 percent annually while he was in office.

Under Clinton, top tax rates were raised and growth slowed, but in his second term tariffs and the capital gains tax rate were cut and the growth rate accelerated at 4.5 percent for the rest of his term.

If you made a chart of changes in tax rates and changes in the economic growth rate, no one could miss the inverse correlation between tax rates and GDP growth in the past 104 years. Reducing tax rates has always been followed by faster economic growth and raising tax rates has always been followed by slower economic growth.

Wayne Sills

Winfield