Looking back at the Great Depression – tax rates and more

This is not inside-baseball economics stuff – don’t be afraid. Arthur B. Laffer at the Wall Street Journal has a good historical review of the Great Depression and what happened with tax rates during the period.

Laffer defines the beginning of the problem, the Smoot-Hawley tariff implemented in 1930.

It was the largest single increase in taxes on trade during peacetime and precipitated massive retaliation by foreign governments on U.S. products. Huge federal and state tax increases in 1932 followed the initial decline in the economy thus doubling down on the impact of Smoot-Hawley. There were additional large tax increases in 1936 and 1937 that were the proximate cause of the economy’s relapse in 1937.

The damage caused by high taxation during the Great Depression is the real lesson we should learn. A government simply cannot tax a country into prosperity. If there were one warning I’d give to all who will listen, it is that U.S. federal and state tax policies are on an economic crash trajectory today just as they were in the 1930s.

You can take Laffer with a grain of salt if you’d like as we remember his 2006 show-down with Peter Schiff (video below), but you can not argue with his fact in today’s WSJ piece.

There’s not much I can add, I’d just suggest you read it and absorb, and please do add your comments below.

Bonus video for the heck of it…

httpv://www.youtube.com/watch?v=LfascZSTU4o

2 replies
  1. donh
    donh says:

    The snake of government has eaten all the food in the jungle and now the beast is consuming itself as seen in the acient egyptian symbol of the Ouroboros… .http://upload.wikimedia.org/wikipedia/commons/f/fa/Ouroboros.png... Government has no option but to consume itself starting from its tail end. That means mistreating weaker people who work for government. It means handing out benefits to dependant people with one hand, and then yanking the money back with the other by some tax . It means outright neglect of people's basic human needs. Part of the dismal science is diagnosing a terminal economic illness. I do not see any medicine to cure the ouroboros cycle. The snake will either kill itself , or we must draw a sword and cut the snake into pieces. Either option leaves us facing a drastic collapse in our standard of living. This is what happens when a government wages a 100 year war on capitalism and the profit motive.

  2. sammy22
    sammy22 says:

    Pretty pessimistic outlook. Are we doomed? Sounds like nobody, even the Conservatives, can save us from collapse.

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