Thomas Sowell on Mellon, Taxes

http://www.futureofcapitalism.com/2010/10/thomas-sowell-on-mellon-taxes

Thomas Sowell's latest column, about "tax cuts for the rich," is one of his all-time best. On how Andrew Mellon, who was Treasury secretary from 1921 to 1932, understood the Laffer Curve before Arthur Laffer was even born:

Mellon said, "It seems difficult for some to understand that high rates of taxation do not necessarily mean large revenue for the Government, and that more revenue may often be obtained by lower rates."

Writes Mr. Sowell:

When one of the Rockefellers died, Mellon discovered that his estate included $44 million in tax-exempt bonds, compared to $7 million in Standard Oil securities, even though Standard Oil was the source of the Rockefeller fortune.

For the country as a whole, the amount of money tied up in tax-exempt securities was estimated to be three times as large as the federal government's expenditures and more than half as large as the national debt.

In short, huge amounts of money were not being invested in productive capacity, such as factories or power plants, but was instead being made available for local political boondoggles, because this money was put into tax-exempt state and local bonds.

When tax rates are reduced, investors have incentives to take their money out of tax shelters and put it into the private economy, creating higher returns for themselves and more production in the economy.

by Editor  |  Oct 26, 2010 at 8:55 am Related Topics:  Taxes receive the latest by email: subscribe to the free futureofcapitalism.com mailing list