The Role of Taxes in the Depression

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The Great Depression was taxes, taxes, and more taxes. The highest rate went from 25 to 63 to 79 in 1936 to 94% in 1944, 45. You wonder why there was a problem. It was a tax driven thing. Just say piled up if it swam the tax. If it flew the tax, if it crawled the tax,. They'd take it, but just sat there and went, they taxed it. Shocking. Imagine that they raised the death tax to almost 90% on that. All of these were new. So that's exactly the story.

According to Dr. Arthur Laffer, since 1913, when the United States first imposed the income tax via constitutional amendment, the top rate of that tax has determined the fate of the American economy. When the top rate has been high, as in the late 1910s, the 1930s, 1940s, 1950s, and 1970s, the response of those with money and capital has been to curtail real economic activity in favor of protecting assets and income streams. Huge declines have come to the economy in these circumstances.

On today’s podcast, ARK CEO, CIO and Founder Cathie Wood is again joined by Dr. Arthur Laffer, a famed economist, well-known for his creation of “The Laffer Curve,” so Dr. Laffer and Cathie can discuss Laffer’s book, Taxes Have Consequences, in which Dr. Laffer provides a history of taxes and their impact on the United States economy. Dr. Laffer explains why he believes that a low rate broad-based flat tax, spending restraint, sound money, minimal regulations, and free trade are the answers to most of our economic problems.

“Low rate broad-based flat tax, spending restraint, sound money, minimal regulations, and free trade, and then get the hell out of the way and let markets solve it.” — Arthur Laffer Key Points From This Episode:

An overview of Arthur Laffer’s new book, Taxes Have Consequences.
How the government finances taxation.
A history of income tax since 1913.
Defining characteristics of the Roaring Twenties.
The market collapse that occurred in 1929.
Similarities between the environment in 1929 and today.
How Art would structure the American tax system if he could.
Why stimulus spending hurts the economy.
Art’s thoughts on regulation.
Why Art is a strong proponent of developing free trade agreements with countries that the US currently has issues with.
What makes America different from the rest of the world.
The correlation between tax hikes and economic performance.
Why everyone benefits in a low rate broad-based flat tax system.
The role of taxes in the Great Depression.
Factors that Art attributes the high inflation levels to.
The importance of acting fast when it comes to changing policies around taxes.
How the pandemic has accelerated the migration to low tax states.
Interesting statistics about states like Texas, Florida and Tennessee.
Art’s thoughts on how to address poverty in the United States.