Schedule a Strategy Session Today
Tax Cuts and Tragedy: JFK Wanted to Lower Income Taxes and LBJ’s Political Maneuverings To Get It Done
A pivotal moment in American tax policy unfolded during President Lyndon B. Johnson's tenure with the passage of the Revenue Act of 1964, a culmination of political maneuvering initiated by President John F. Kennedy.
President John F. Kennedy advocated for tax cuts as part of his economic policy agenda. Kennedy believed that reducing taxes could stimulate economic growth, increase consumer spending, and create jobs. He argued that lower tax rates would incentivize investment and entrepreneurship, ultimately leading to a more vibrant and prosperous economy. The highest marginal tax rate at that time was 91% and had been there since 1954. It was 92% before then.
Kennedy's push for tax cuts was primarily motivated by his desire to address economic stagnation and unemployment. He believed that by putting more money in the hands of individuals and businesses, tax cuts could spur economic activity and alleviate the lingering effects of the recession in the early 1960s.
In his message to Congress on tax reduction in 1963, Kennedy famously stated: "A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues."
Kennedy's proposal for tax cuts faced resistance from some quarters, including fiscal conservatives who were concerned about the potential impact on the federal budget deficit.
And then on November 22, 1963, JFK was assassinated. His tax cuts were still in the legislative process.
Following Kennedy's assassination, President Lyndon B. Johnson capitalized on the national mood of mourning and used it to push forward Kennedy's legislative agenda, including tax cuts.
The act significantly reduced income tax rates, particularly for the wealthiest Americans, while also closing certain tax loopholes. The highest marginal tax rate was reduced from 91% to 70%.
Johnson, known for his adeptness in legislative maneuvering, saw an opportunity to gain bipartisan support by framing the tax cuts as part of Kennedy's unfinished business. By aligning himself with Kennedy's legacy, Johnson aimed to secure broad support for the tax legislation. The Democratic Party held the majority in both the House of Representatives and the Senate throughout JFK and LBJ’s presidencies.
The tax cuts were championed by powerful business interests and lobbyists, who saw them as a way to stimulate economic growth and investment. Their influence on lawmakers, particularly in persuading them to lower the top marginal tax rates, was significant.
With the economy facing challenges, there was growing public pressure for tax relief. Johnson capitalized on this sentiment, framing the tax cuts as a way to boost economic prosperity and create jobs, thus garnering public support for the legislation.
Johnson, who was running for re-election in 1964, viewed the tax cuts as a strategic move to bolster his chances of winning the presidency. By delivering tax relief, he aimed to appeal to voters across the political spectrum and solidify his political base.
The final version of the Revenue Act of 1964 went through several rounds of negotiations and revisions. Johnson, known for his persuasive skills and willingness to engage in backroom deals, played a hands-on role in brokering compromises and rallying support for the bill.
The Revenue Act of 1964 significantly reshaped the U.S. tax system, with its emphasis on across-the-board tax cuts and reductions in the top marginal tax rates. It laid the groundwork for subsequent tax reform efforts and left a lasting legacy on American fiscal policy.
Overall, the passage of the Revenue Act of 1964 exemplifies the intricate interplay of politics, economics, and public sentiment in shaping income tax legislation in the United States.