The Revenue Act of 1926 never appears in any historical discussions about what the U.S. did right after the Great War. When Andrew Mellon and Calvin Coolidge succeeded in getting the conventionally-minded Republicans in Congress to adopt this truly "radical" legislation, they established the most successful tax regime in American history. To this day the surcharge rates of the 26 Act remain the most effective soaking of the rich; had the wealthy actually handing over enormous amounts of money to the Treasury while at the same time persuading them to go out and make even more money and pay even more taxes. That is, of course, the reason why it has disappeared from history. To remember it would call into question the central assumptions of almost all modern economic doctrine - that neither money standards nor tax rates and structures matter.

America's entry into the Great War depended on the notion that great nations were built by collective sacrifice. Without that religious assumption - which also drove the push for Prohibition, the Zimmerman Telegram might not have been enough to persuade Congress to vote for mass conscription and nationalization of the railroads. For Americans to take a side among the European powers in their struggle for territory, they had to believe that the Great War was really a sacred Crusade to establish fairness in the world. To an extraordinary extent, that belief carried forward through the 1920 election. Harding was able to secure a modest reduction in tax rates, but his 1921 Revenue Act only removed the excess profits tax and lowered the top rate by 1/5th. But a lowering of the top rate from 73% to 58% did very little to defeat the presumption that the rich should hand over most of their income to the government for the sake of the public good.

1926 changed all that.





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