Message in a bottle (circa 1963): For the complete avoidance of doubt (a legal contract phrase) this is not a political post. Cash Flow Fact: George Washington was very land rich, but cash poor. He had to borrow money for travel expenses to attend his own inauguration. Consider this a history lesson for those of us who “cut” history class on Friday afternoons in college. If anything, I align politically with the Founding Fathers, including Thomas Paine, who wrote that very subversive pamphlet in 1775 called “Common Sense.”
1963 (JFK). Revenue Act of 1964. In January 1963 President Kennedy got his Legislation passed that would reduce the top marginal tax rate from 91% (not a typo) to 65% and lower the corporate tax rate from 52% (again, not a typo) to 47%. The legislation was heralded as his economic legacy.
1986 (Reagan). Tax Reform Act of 1986. These rates were then downsized again by the 1986 Tax Reform Act, when President Reagan signed the legislation on October 22, 1986. The top income tax rate was reduced from 50% to 28%.
2017 (Trump). Tax Cuts and Jobs Act of 2017. Among other matters, this Act retained the lowest Capital Gain Tax Rate, ever, and it raised the Estate Tax Exemption amount to $11 million, (indexed for inflation) which sunsets on December 31, 2025, going back to $5 million (FYI).
The New Norm circa 2021: We all think the current tax rates are the “norm.” By analogy, it is like my two 20-something sons thinking that the Packers always had Brett Farve or Aaron Rodgers at quarterback; never having lived through the barren quarterback years. This is a cash flow discussion. JFK’s 1963 tax cuts decreased then personal income taxes by $10 billion and corporate taxes by about $3.5 billion. I think I can calculate the back-of-the cocktail napkin future value of this metric to determine what tax hikes are necessary for baseline solvency. What tax hikes are necessary I leave to common sense.
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