Wednesday, April 22, 2015

Coolidge and Taxes

President Calvin Coolidge and Secretary of the Treasury Andrew Mellon agreed that taxes were a burden to ordinary citizens, and that taxes should be reduced. Mellon held his post already under President Harding, so when Coolidge took office, Mellon was solidly in place.

Mellon had already worked with Harding to get one round of tax cuts through Congress. Coolidge and Mellon would introduce additional tax reductions for congressional consideration in 1924, 1926, and 1928.

Already by 1924, Mellon and Harding had largely removed income taxes from the ordinary working class. In that year, Mellon and Coolidge would work on reducing the tax burden on the middle class. Historian Amity Shlaes writes:

Now, on taxes, Coolidge and Mellon pushed forward. The men told themselves they had the angles covered. The Treasury was readying a plan to publicize the tax problem: a National Tax Reduction Week, scheduled for early April. Mellon, cheered to have the support of such an ally, even planned to market his ideas. Mellon’s deputy, David Finley, was pulling together statements by Mellon and the administration into a little book that Macmillan would publish. The regular worker did not pay the income tax, but, Mellon believed, the regular worker would benefit from the tax rate cut. Therefore he titled his book Taxation: The People’s Business. The book was remarkable in its clarity, and for what it did not contain: the word “tariff” appeared only once, and revenues from customs were described as “abnormally high.”

While Mellon saw tax cuts as an encouragement for economic growth, Coolidge saw them as a matter of justice. If it was possible to relieve the working and middle classes, and reduce their tax burden, then justice required that it be done. If high marginal rates caused the upper classes to find loopholes in the tax code, then lower marginal rates would free that money to flow through the economy and stimulate growth.

Coolidge’s sense of justice about these matters was not primarily a legalistic morality driven by a need to follow rules, or make sure that others followed them. Instead, his sense of virtue was forward-looking, and was about taking action to improve one’s community.

Economics was, for Coolidge, an outgrowth of his spiritual worldview. He steered between a legalistic religion of rules and a worldly worship of governmental power, avoiding either extreme. Historian David Greenberg writes:

Less a censorious Puritan than a pious man of sentimental faith, Coolidge shunned the era’s new secularism as well as its resurgent fundamentalism; he saw religion as a source of virtue, not of division, oppression, or intellectual limitation.

Although motivated by his concept of personal virtue, Coolidge was still a man who’d worked his way through electoral cycles. He understood that tax cuts would help him at the polls.

President Harding was slightly more than halfway through his four-year term when he died, nudging Coolidge into office. Coolidge knew that the voters would be wondering about who he was. A tax cut was a way to send a clear signal about his political identity.

With the election in November 1924, the spring of that year was a good time to send that signal. Historian Robert Ferrell writes:

Personal income tax rates were highly political propositions, both in recommendation and in passage through Congress, and it is noteworthy that Coolidge proposed the Mellon tax cut of 1924 in March of that year, in time for the Republican convention and the subsequent election. It immediately placed the president in the public eye.

Economic policy would define the Coolidge administration in the popular imagination.

He took significant actions regarding race relations: Coolidge snubbed the KKK, which had enjoyed presidential favor during the Wilson administration; Coolidge promoted anti-lynching laws; he was the first incumbent president to deliver a commencement address at a historically Black college when he spoke at Howard University.

He also laid the foundation for a decade of peace. Coolidge worked with Charles Dawes; the result was the Dawes Plan, which restructured the payment of war reparations in 1924. Coolidge selected Dawes as vice president later that year. Coolidge appointed Frank Kellogg to be Secretary of State; the result was the Kellogg-Briand Pact, a treaty designed to offer diplomatic negotiations in an attempt to resolve international conflicts before they turned into open warfare. Although the war had ended only a few years before, Coolidge saw that tensions between various nations were already rising and that another war could easily erupt.

Despite his impact on both race relations and world peace, it was Coolidge’s economic policy that most affected the daily life of the ordinary citizen, that formed the popular image of him in the collective consciousness, and that is most remembered.