Cutting Marginal Tax Rates: Evidence from the 1920s Tax Cuts
Lead to Economic Growth OCTOBER 01, 1996 by GENE SMILEY Dr.
Smiley teaches at Marquette University. Recent political debates
have raised the issue of adopting a flat marginal rate federal
income tax. Though the marginal rate would be flat, the addition
of a generous personal exemption would make the average personal
income tax rate rise as it approached the fixed marginal rate
of, say, 17 or 20 percent. This issue has generated considerable
controversy in political debates and in the press. Among the
criticisms leveled at a flat marginal rate tax system are that,
contrary to proponents’ claims, a flat marginal tax rate will
provide a windfall of after-tax income for the already wealthy,
worsen the distribution of income, and exacerbate the already
swollen federal government deficits. Supporters have usually
concentrated on extolling the virtues of reducing the
distortions caused by rising marginal tax rates and of
encouraging greater entrepreneurial