The Morality of Tax and Debt Reduction
By Sidney Lin
This article appears in the Winter 2025 issue of the Coolidge Review. Request a free copy of a future print issue.
President Calvin Coolidge saw taxation not simply as an economic issue. He opposed high tax rates on moral grounds as well.
In a 1924 speech, Coolidge said that the “chief meaning of freedom” was to have the rewards of one’s own work. His philosophy of limited government flowed from this belief in individual freedom. In another 1924 speech, the president declared, “A government which lays taxes on the people not required by urgent public necessity and sound public policy is not a protector of liberty, but an instrument of tyranny.”
The next year, in his inaugural address, Coolidge said: “The men and women of this country who toil are the ones who bear the cost of the government. Every dollar that we carelessly waste means that their life will be so much the more meager.”
Coolidge also understood the economic logic behind reducing income tax rates. His treasury secretary, Andrew Mellon, laid out the case in the 1924 book Taxation: The People’s Business. “The history of taxation shows that taxes which are inherently excessive are not paid,” Mellon wrote. “The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business.”
In other words, when tax rates are high, people reduce their taxable income. Taxpayers work less, retire sooner, curb fruitful business growth, and move money into tax-exempt securities.
Such tax avoidance occurred during the previous decade, when the top income tax rate reached 77 percent.
PROSPERITY UNLEASHED
For all these reasons, both President Warren Harding and President Coolidge worked with Mellon to secure across-the-board tax cuts. The Revenue Acts of 1921, 1924, and 1926 brought income tax rates successively lower. The top rate fell from 77 percent in 1918 to 25 percent in 1926.
These reforms had a profound impact on federal revenues and economic growth. Even as tax rates decreased sharply, personal income tax revenue grew by a staggering 61 percent from 1921 to 1928. And high-income earners paid a much larger share of overall taxes. According to data from the U.S. Treasury Department, Americans who earned more than $100,000 paid only about 30 percent of total income taxes in 1920. By 1928, following the reforms, those high earners had taken on more than 60 percent of the tax burden.
A look at various tax brackets reveals more benefits of the rate cuts. Many more people came to share in the wealth. The number of people earning more than $100,000 grew dramatically, as did the number earning between $10,000 and $100,000.
Reduced tax rates also encouraged people to withdraw money from tax-exempt investments, which had been used to avoid taxes. Instead they invested in new, growing industries. This investment gave rise to the products that improved the quality of daily life in the 1920s—radio, electrical appliances, airplanes, and more.
In his Autobiography, President Coolidge proudly noted the impact of what he called “constructive economy,” which involved both reducing taxes and cutting the national debt. “This policy,” he wrote, “has encouraged enterprise, made possible the highest rate of wages which has ever existed, returned large profits, brought to the homes of the people the greatest economic benefits they ever enjoyed, and given to the country as a whole an unexampled era of prosperity.”
LESSONS IGNORED
Unfortunately, elected officials today don’t follow Coolidge’s model of constructive economy. The top personal income tax rate in 2024 stood at 37 percent, much higher than the 25 percent rate that Coolidge and Mellon secured.
Worse, fiscal discipline has vanished from Washington. President Coolidge ran a surplus every year he was in the White House and reduced the national debt by about a third. By contrast, the annual federal deficit today routinely exceeds $1 trillion. The total debt reached an astronomical $35 trillion in the summer of 2024—and keeps rising.
Our elected leaders have forgotten another piece of wisdom from President Coolidge: “The appropriation of public money always is perfectly lovely until someone is asked to pay the bill.” Just as tax reform will relieve the overburdened American taxpayer and promote economic growth, restoring fiscal responsibility will ensure the economic well-being of future generations.
Each year, thousands of high schoolers write essays about Calvin Coolidge as part of their application for the Coolidge Scholarship. Coolidge Scholar Sidney Lin, a senior at the Bronx High School of Science, adapted her application essay for the Coolidge Review.
This article appears in the Winter 2025 issue of the Coolidge Review. Request a free copy of a future print issue.