Kennedy: The First Supply-Side President?

“It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now ... Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding

economy which can bring a budget surplus." 

– President John F. Kennedy (November 20, 1962)

President John F. Kennedy knew that in order for the economy to grow and generate jobs, Congress would need to lower tax rates. He believed in the simple principle that when people have more money, they spend it, generating additional economic activity and tax receipts. While he pushed for reform during his presidential campaign and throughout his presidency, the first of his proposed tax cuts were not passed until February 26, 1964, after his death. 

Kennedy proved to be a visionary in fiscal policy. Not only did lower tax rates lead to higher tax revenues, which increased from $94 billion in 1961 to $153 billion in 1968, but lower rates resulted in a declining unemployment rate. This was due in part to additional consumer spending, as well as businesses spending the money they saved on capital investment and hiring more workers—while taking additional entrepreneurial risk. 

Gross domestic product grew at 5.8 percent in 1964, 6.5 percent the following year, and 6.6 percent the year after that. Individuals benefitted from finding jobs and having confidence that the economy would continue to improve.

FutureOfCapitalism.com editor Ira Stoll,  author of the recently-published JFK, Conservative, says that President Kennedy wanted to cut tax rates because doing so improves incentives to work, save, and invest. According to Stoll, Treasury Secretary Douglas Dillon described the tax cuts as the first of what Kennedy hoped would be a series of additional future cuts. Kennedy knew that people respond to incentives, and he was not going to settle at lowering top marginal rates from over 90 percent to 70 percent.

Kennedy did not live to see his tax plan enacted. We will never know how far tax rates would have dropped under his leadership, but we do know that future presidents, such as Ronald Reagan and George W. Bush, followed his leadership on tax reform with similar results. The American people benefitted as well, and should thank the 35th President on the 50th anniversary of his assassination for promoting sensible policies to  turn the economy around.

Read more about President Kennedy's tax policies here.