Heather Cox Richardson's False History
Historian Heather Cox Richardson, on her public Facebook page on October 28, 2021, wrote a long post about the Great Depression, Herbert Hoover, and FDR.
Her story about Hoover’s tax policy is false.
President Hoover knew little about finances, let alone how to fix an economic crisis of global proportions. He tried to reverse the economic slide by cutting taxes and reassuring Americans that “the fundamental business of the country, that is, production and distribution of commodities, is on a sound and prosperous basis.” But taxes were already so low that most folks would see only a few extra dollars a year from the cuts, and the fundamental business of the country was not, in fact, sound. When suffering Americans begged for public works programs to provide jobs, Hoover insisted that such programs were a “soak the rich” program that would “enslave” taxpayers, and called instead for private charity.
What in fact did Hoover do? The opposite. Here are some excerpts from economist Steve Horwitz in “Hoover’s Economic Policies,” in David R. Henderson, ed. The Concise Encyclopedia of Economics.
First, on taxes on imports, aka, tariffs:
Even those with only a casual knowledge of the Great Depression will be familiar with one of Hoover’s major policy mistakes—his promotion and signing of the Smoot-Hawley tariff in 1930. This law increased tariffs significantly on a wide variety of imported goods, creating the highest tariff rates in U.S. history. While economist Douglas Irwin has found that Smoot-Hawley’s effects were not as large as often thought, they still helped cause a decline in international trade, a decline that contributed to the worsening worldwide depression.
Second, on his massive increase in income tax rates:
On top of these spending proposals, most of which were approved in one form or another, Hoover proposed, and Congress approved, the largest peacetime tax increase in U.S. history. The Revenue Act of 1932 increased personal income taxes dramatically, but also brought back a variety of excise taxes that had been used during World War I. The higher income taxes involved an increase of the standard rate from a range of 1.5 to 5% to a range of 4 to 8%. On top of that increase, the Act placed a large surtax on higher-income earners, leading to a total tax rate of anywhere from 25 to 63%. The Act also raised the corporate income tax along with several taxes on other forms of income and wealth.
If you want to know more about how income tax rates increased at each level of income, go here. Before the web existed, the go-to guy who documented income tax rates at each income level from the early 1900s to the late 1980s was the late Joe Pechman of the Brookings Institution. Fortunately, the Tax Foundation has made that so much easier.
HT2 Phil Magness.