50 Years After the House Vote for the Kennedy Tax Cut 25, 1963, the tax cut proposed by President John F. Kennedy took its first major step toward enactment when the House of Representatives voted in favor of it. Its comfortable victory, however, does not mean the tax cut was a slam dunk. On the contrary, it was an uphill struggle that required considerable work by the White House to gain passage. In this post and a subsequent one, I'll look at how Kennedy prevailed. Contrary to his reputation as a wild-eyed liberal Keynesian who supported budget deficits as economic stimulus, Kennedy was in fact very conservative, fiscally and on national security. For example, in 1957 he opposed a tax cut, in large part because the nation's growing military demands required more, not less, government revenue. As I explained in an earlier post, Kennedy changed his mind when confronted by an economy that was growing too slowly, which threatened his re-election in 1964. But he was constrained by two things. First was the opposition to deficit spending by conservatives, including many powerful Southern Democrats. Second was the precarious position of the dollar and the system of fixed exchange rates, which required the Treasury to freely trade dollars to foreign central banks for gold at $35 an ounce. The large current account deficit made maintenance of that system increasingly difficult. Deficit spending threatened inflation, which would also make it difficult to prevent a devaluation of the dollar. Kennedy's principal response was that a recession would be far more injurious to the dollar and the deficit. In a Feb. 14, 1963, news conference, he said, "If we don't have the tax cut, it substantially, in my opinion, increases the chance of a recession, which will increase unemployment, which will increase the size of our deficit." He also said a recession would make the balance of payments worse: "The tax cut argument rests with the desire to stimulate the economy and prevent a recession which will cost us the most - domestically, internationally - on our budget and on our balance of payments." Kennedy's original tax plan contained substantial reforms, but in a Feb. 25, 1963, speech, he said he was willing to abandon them to get a tax cut. Republican economists including Arthur F. Burns and Raymond J. Saulnier, both of whom served as chairmen of the Council of Economic Advisers under Dwight D. Eisenhower, made the now-familiar argument that the tax cuts needed to be paired with spending cuts to be effective. This view was echoed by Republicans in Congress. Surprisingly, the public was cool to a tax cut, even though the high tax rates of World War II and the Korean War were largely still in effect. The top statutory tax rate was 91 percent and the bottom rate was 20 percent. 2, 1963, Harris poll published in The Washington Post found voters putting a balanced budget ahead of a tax cut, 41 percent to 36 percent. On the eve of the House Ways and Means Committee's vote on the tax cut, Kennedy was forced to respond to criticism that a tax cut would widen the deficit. In a Sept. 10, 1963, speech, he said, "By reducing the costly drain of unemployment and recession, while expanding our national income and tax revenues, it will, combined with an ever stricter control of expenditures, reduce and eventually end the pattern of chronic budgetary deficits." The Ways and Means Committee supported the tax cut, 17 to 8, with two Republicans in favor. One of them was Representative Howard H. Baker of Tennessee, later the Senate majority leader and the White House chief of staff for President Ronald Reagan. The New York Times reported, however, that the tax cut's prospects in the Senate were always the primary White House concern. Most Republicans continued to denounce the tax cut as economically unsound. In a nationwide radio and television address, Representative John W. Byrnes of Wisconsin, the ranking Republican on Ways and Means, called the Kennedy tax cut "an unprecedented gamble" with the economy and said it was like "playing Russian roulette with our destiny." Representative Byrnes insisted that spending be cut if taxes were to be cut and that a tax cut should be made contingent upon reduced spending. Failure to do so would be dangerously inflationary, he said. "All of this threatens confidence in the dollar at home and abroad, leading to the risk of bringing on a worldwide depression," he warned. On the House floor, Republicans made an effort to tie the tax cut to spending cuts. But their only hope of victory lay with support from conservative Southern Democrats, who viewed the G.O.P. approach as gimmicky and unworkable. 25, 1963, the final House vote was taken. The Republican plan was rejected, 226 to 199, gaining the support of only 23 of the 95 Southern Democrats in the House. The final vote in favor of the tax cut was 271 to 155, with 48 Republicans supporting it and 126 opposed. Among Democrats, 223 voted in favor, with 29 against. Most of the Republican yea votes came from the Northeast, where the party then had a substantial presence. Among those supporting it were Representatives John V. Lindsay, who was later mayor of New York City, and Charles E. Goodell, who later was a United States senator from New York. Among the Republican no votes were a number of representatives who later became staunch supporters of tax cuts under Ronald Reagan. These included Representatives Bob Dole of Kansas, who went on to serve as Senate majority leader and was the 1996 Republican candidate for president; Bill Brock of Tennessee, later senator and chairman of the Republican National Committee; and Donald H. Rumsfeld of Illinois, who twice served as secretary of defense. Representative Baker ended up voting no as well. Opponents of the tax cut immediately shifted their attention to the Senate, where opposition among Southern Democrats was much stronger. In particular, Senator Harry F. Byrd Sr. of Virginia, chairman of the powerful Senate Finance Committee, strongly opposed a tax cut without corresponding spending cuts. Another opponent was Senator Albert A. Gore Sr. of Tennessee, whose son was later vice president. It is quite possible that the tax cut would have died in the Senate, but the political landscape changed strikingly before the Senate could act, when President Kennedy was assassinated on Nov. 22, 1963. I will have more to say about the tax cut in a subsequent post.