The Path to Economic Prosperity is Well Walked


The United States has a long history of using tax cuts to spur growth.


Historically, tax cuts have been used as a tool to relieve Americans of some financial burden and, in turn, create economic prosperity. Right now, we have the opportunity to do it again.

One of the most cited tax relief packages in modern American history was under President Ronald Reagan – the popular actor turned politician. His 1981 Economic Recovery Act cut taxes for essentially all Americans by roughly 25 percent. And his 1986 Tax Reform Act furthered this policy goal by simplifying the tax code and streamlining tax brackets.

Even more impressive is the effect it had on individual drive and purpose. You see, at the previous top tax rate of 70 percent, Americans were content with making moderate incomes because once they entered the top tax bracket, Uncle Sam was entitled by law to over two-thirds of their hard earned cash. But once the rate was lowered, the individual’s drive to innovate and build for financial gain was restored – creating a larger pool of taxable income.

The effect was extraordinary. Tax revenues actually increased from $500 billion to $1 trillion during the 1980s – all while people were able to keep more of their own money and invest it in bettering themselves, their businesses and their communities. This economic principle was even coined the “Laffer Curve.”

But this national tradition of lowering taxes in order to achieve economic expansion and more government revenue is not a modern phenomenon. In fact, President Calvin Coolidge knew it quite well. At the end of World War I, the top tax rate was 77 percent and by the time Coolidge left office, the rate had dropped to a mere 24 percent. Because of this tax relief, tax revenue once again went up – with much of it originating from the upper class. For those making $100,000 a year or more, tax revenue rose by roughly $5 billion when taking inflation into account.

In 1963, President Kennedy also called for tax cuts. His plan to reduce taxes by $13.5 billion was initially blocked by Congress, but was eventually passed by his successor, President Johnson, after his untimely death. Once implemented, the policy dropped the unemployment rate by 1.4 percent, as well as raising tax revenue.

Our country now has a similar opportunity. U.S. small businesses can pay federal tax rates as high as 40 percent – one of the highest rates in the developed world. And just as tax cuts spurred economic expansion in the past, they can do it again by reinvigorating the engine of our modern economy – independent small businesses and franchises.

A recent nationwide poll of small-business owners conducted by the Job Creators Network reveals the economic power that small-business tax cuts would unleash. According to the poll, a majority of respondents reported that financial savings from tax cuts would be reinvested back into their businesses and employees. This means hiring more workers, raising wages, and expanding to new locations – the cornerstones of economic growth.

As you can see, a formula for economic prosperity has already been discovered. By unleashing the job creation potential of small businesses through significant tax cuts, we too can experience economic growth of historic proportions. ■

Alfredo Ortiz is the president and CEO of the Job Creators Network.

Photo credit: ©iStock/kwasny221


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