The Wall Street Waltz: 90 Visual Perspectives, Illustrated Lessons From Financial Cycles and Trends, Revised and Updated Edition

Chart 81

Balancing the Budget with Hot Air

The whole thing is nuts. I mean the 1986 tax hike, cleverly disguised as a tax-rate cut. Lower tax rates supposedly spur us to work harder in anticipation of keeping more of our earnings. Well, who knows, but if I work much harder, my wife is going to sue me for abandonment. Besides, it gripes me that all those government people, spurred on by supply-side economics (see text with Chart 79), want me to work harder so they can collect more to pay off a deficit that was created by them, spending money they didn't have on things I never wanted them to do.

I myself am opposed to federal spending, but if we must have it, instead of financing it through tax-rate cuts, I favor an ad valorum tax on hot air. There's certainly plenty of it around.

Besides, tax rates were great last year compared to the longer-term history of the United States. This 2-part chart shows maximum tax rates since the start of income taxes. The cameo shows the progressive taxation of one additional dollar of income. For example, between 1954 and 1967, if you earned $50,000, your next earned dollar would be taxed at 60 percent. (Remember, this has no inflation adjustment, so $50,000 then is like $200,000 now—see Chart 52).

Supply-side economists think tax-rate cuts generate booming economies and high tax rates are bad, bad, bad. So maybe they thought the booming 1920s resulted from Republican generated maximum tax cuts from 78 percent to 22 percent. Maybe it would have been ...