http://www.cato.org/pubs/tbb/tbb-0303-14.pdf
In the 1920s, Treasury Secretary Andrew Mellon
championed a series of income tax cuts that reduced the top individual rate from 73 percent to just 25 percent by 1925. As rates fell, the U.S. economy boomed until the stock market crash in 1929. After the crash and a sharp monetary contraction that pushed the economy into the Great Depression, the lessons of Mellon’s successful tax cuts were forgotten. Presidents Hoover and Roosevelt pursued large tax increases based on the mistaken ideas that the budget should be balanced during a contraction and that high tax rates would achieve that goal.
Today, the relationships between tax rates, deficits,
and economic growth continue to be debated. In the 1930s, high and rising taxes coincided with large budget deficits and poor economic performance.
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