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Wall Street Journal Market Watch

 

6 Lessons From JFK on Tax Policy

November 22, 2013

By Diana Furchtgott-Roth

With fourth-quarter GDP growth estimated at less than 2%, an unemployment rate above 7% for almost five years, and the lowest percentage of Americans employed or looking for work since 1978, America needs lessons from President John F. Kennedy.

Here are six lessons from Kennedy, who was assassinated 50 years ago today.

Lesson 1: Economic growth creates jobs

Kennedy, dissatisfied with economic growth rates of 2%, wanted four or five percent growth. Speaking on the Indianapolis radio station WTTV on Oct. 4, 1960, he said "In order to maintain full employment in the 1960s, which, after all, must be the object for all of us, we are going to have to have an economic growth twice what we had last year, about 4.5% per year instead of 2.4%."

Kennedy continued, "We have to secure 25,000 new jobs a week for the next 10 years in order to provide jobs for all of the people coming into the labor market. That is a terribly difficult task at a time when automation and new machinery has taken the jobs of men. And at the present rate of economic growth or productivity increase, we are not going to have those jobs for people." Read JFK’s remarks here. The labor force in 1960 was 70 million, now it is 156 million. Kennedy needed 25,000 jobs a week in the early 1960s. In 2013, America needs about 50,000 jobs a week, or 200,000 a month, to generate employment in an expanding economy with a growing population. That does not even count replacing the 1.5 million jobs that disappeared during the 2007-2009 recession.

Lesson 2: Lower taxes stimulate economic growth

Kennedy eloquently described the potential effects on economic growth of reducing taxes. When people have more money, they spend it, generating additional tax receipts.

On Sept. 18, 1963, he said, "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."

In 1963, he suggested cutting individual income taxes from a range of 20% to 91% to a range of 14% to 65%. Kennedy wanted to lower the top corporate tax rate from 52% to 47%.

Lesson 3: Tax havens attract multinationals

Kennedy understood the role of corporate tax rates in attracting foreign investment. In a message to Congress on taxation on April 20, 1961, he said, "In those countries where income taxes are lower than in the United States, the ability to defer the payment of U.S. tax by retaining income in the subsidiary companies provides a tax advantage for companies operating through overseas subsidiaries that is not available to companies operating solely in the United States. Many American investors properly made use of this deferral in the conduct of their foreign investment."

Note that Kennedy said "investors properly made use of this deferral." These days, investors are often attacked for seeking low-tax locations.

Original Source: http://www.marketwatch.com/story/6-lessons-from-jfk-on-tax-policy-2013-11-22

 

 
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