Grand Expectations: The United States, 1945-1974 (Oxford History of the United States Book 10)

by James T. Patterson

The tax cut especially revealed the limitations of Kennedy-style domestic policy. When finally approved in 1964 it marked a considerable change in federal tax policy. The top marginal tax rate on individuals was cut from 91 to 70 percent; the tax rate on the lowest bracket fell from 20 to 14 percent. Corporate tax rates dropped from 52 to 48 percent. The law was estimated to save taxpayers $9.1 billion dollars in 1964.23 Heller and others were delighted, crediting the law for the extraordinary economic growth and prosperity that characterized the mid-1960s. The tax cut, they reiterated, proved their contention that social science expertise could fine-tune public policy. In fact, however, the tax cut, as Galbraith and others had said, mainly assisted the well-off. Moreover, it probably had little to do with the great prosperity that arose by 1965. The American economy had already begun in 1962 to rebound from a largely cyclical downturn. Central to this recovery, aside from cyclical forces, were large and pre-existing developments, including the low cost of energy, such as oil; continuing technological innovation; the expansion of world trade; and heightened productivity. Certain sectors of the American economy further benefited from rapid increases in military spending during the Kennedy years. In many areas these increases boosted expansion more than did the tax cut.24