Today the federal individual income tax seems a permanent fixture of American life. But the income tax was relatively young in the 1920s, having been made permanent by the Sixteenth Amendment to the Constitution and the 1913 Underwood-Simmons Act. Following World War I, tax rates were high and federal tax reform thus a major policy priority for both parties. The 1920 Republican platform called the load of taxes on Americans “staggering,” and the Democratic platform likewise advocated reform. Upon becoming president in 1921, Warren Harding made tax reduction a key goal of his administration. When Harding passed away in 1923, President Coolidge and his Treasury Secretary Andrew Mellon continued to pursue tax rate cuts.
The 1920s represent an early experiment in tax reform. In this essay, you are tasked with analyzing this experiment. What was the logic behind the 1920s tax reforms? Reviewing the evidence from this decade, what is your evaluation of the impact of the 1920s tax reforms? Please find resources available at the link below to assist in your research. You may augment these materials with additional research if you like. Please limit your essay to 600 words. Note: You need not agree with Coolidge personally, but do try to get into his head and explain the logic of his policy.
Required Readings & Research
- One of the required readings for Essays 2 and 3 is the Autobiography of Calvin Coolidge. The Coolidge Foundation recently published a new edition of the Autobiography, which includes a new introduction and additional supplemental material. The new edition can be purchased from the Coolidge Foundation’s online store at this link. Older editions of the Autobiography are also acceptable for you to read, and can be found at most libraries. A free version of an older edition of Coolidge’s Autobiography can also be accessed here from Archive.org. (Note: Archive.org is a third-party site and is not affiliated with the Coolidge Scholars Program.)
- Chapter 1 of Taxation: The People’s Business by Treasury Secretary Andrew Mellon
- Address Before the National Republican Club – Excerpt of speech by President Coolidge, February 12, 1924
- President Coolidge’s 1925 Inaugural Address – Excerpt of speech by President Coolidge, March 4, 1925
- Address at the Fifteenth Regular Meeting of the Business Organization of the Government – Excerpt of speech by President Coolidge, June 11, 1928
- Speech by Treasury Secretary Andrew Mellon – Excerpt of speech by Andrew Mellon, October 11, 1928
- Summary of federal income tax rates from 1920-1928; Source: Tax Foundation – Historical Individual Income Tax Rates & Brackets
- Federal income tax receipts by income group during the 1920s; Source: Treasury Department, United States Internal Revenue, Statistics of Income
- Summary of federal receipts, outlays, and surpluses or deficits from 1913 – 1940; Source: White House, Office of Management and Budget
- Additional historical data on the 1920s economy is available in “The U.S. Economy in the 1920s,” by Gene Smiley