Was high taxes a cause of the Great Depression?
It wasn't until after President Hoover (elected in 1928) decided to raise taxes and raise tariffs that a bad economic downturn became the Great Depression.
Previous studies of the U.S. Great Depression find that increased government spending and taxation contributed little to either the dramatic downturn or the slow recovery. These studies include only one type of capital taxation: a business profits tax.
Among the suggested causes of the Great Depression are: the stock market crash of 1929; the collapse of world trade due to the Smoot-Hawley Tariff; government policies; bank failures and panics; and the collapse of the money supply.
The Great Depression started following the stock market crash of 1929, which wiped out both private and corporate nominal wealth.
(1) The stock market crash of 1929 shattered confidence in the American economy, resulting in sharp reductions in spending and investment. (2) Banking panics in the early 1930s caused many banks to fail, decreasing the pool of money available for loans.
As a share of GDP, individual income taxes amounted to 1.1 percent of GDP in both 1929 and 1930, when tax rates were 1.1 percent to 25 percent, but then fell to an average of 0.7 percent of GDP from 1932 to 1935, when tax rates were 4 percent to 63 percent.
Although there is no general agreement on the primary causes of the U.S. Great Depression— defined as both the sharp economic contraction in the early 1930s and the subsequent slow recovery—many do agree that fiscal policy played only a minor role.
Factories were shut down, farms and homes were lost to foreclosure, mills and mines were abandoned, and people went hungry. The resulting lower incomes meant the further inability of the people to spend or to save their way out of the crisis, thus perpetuating the economic slowdown in a seemingly never-ending cycle.
The Great Depression was triggered by the stock market crash of 1929, but many other causes contributed to what became the worst economic crisis in U.S. history. The stock market crash cost investors millions of dollars and contributed to bank failures and industry bankruptcies.
As the Depression worsened in the 1930s, many blamed President Herbert Hoover…
What were the 3 main causes of the Great Depression?
The Great Depression was an economic crisis that began with the stock market crash of 1929 and lasted for nearly a decade. The causes of the Great Depression included the stock market crash of 1929, bank failures, and a drought that lasted throughout the 1930s.
Not everyone, however, lost money during the worst economic downturn in American history. Business titans such as William Boeing and Walter Chrysler actually grew their fortunes during the Great Depression.
The Great Depression of 1929–39
Encyclopædia Britannica, Inc. This was the worst financial and economic disaster of the 20th century. Many believe that the Great Depression was triggered by the Wall Street crash of 1929 and later exacerbated by the poor policy decisions of the U.S. government.
Numerous TikTok creators have theorized that the United States is experiencing a "silent depression" — a period of economic contraction that is at least as severe as the Great Depression, leading many Americans to bemoan their diminished well-being and spending power.
In the midst of the Great Depression, Hoover was decisively defeated by Democratic nominee Franklin D. Roosevelt in the 1932 presidential election. Hoover's retirement was over 31 years long, one of the longest presidential retirements. He authored numerous works and became increasingly conservative in retirement.
The post-war depression did not start with the Stock Market Crash of 1929. For the Midwest, it started in 1921, and farmers and the small towns that depended on the land were hit hard. In the 1920s, only slightly less than half of the U.S. population lived on farms.
How do taxes affect the economy in the long run? Primarily through the supply side. High marginal tax rates can discourage work, saving, investment, and innovation, while specific tax preferences can affect the allocation of economic resources. But tax cuts can also slow long-run economic growth by increasing deficits.
The top income tax rate reached above 90% from 1944 through 1963, peaking in 1944, when top taxpayers paid an income tax rate of 94% on their taxable income. Starting in 1964, a period of income tax rate decline began, ending in 1987.
- New York: 12.47%
- Hawaii: 2.31%
- Maine: 11.14%
- Vermont: 10.28%
- Connecticut: 9.83%
- New Jersey: 9.76%
- Maryland: 9.44%
- Minnesota: 9.41%
Financial troubles can also contribute to depression. If you get laid off, are broke, or in debt these stressors can trigger a depressive episode in those prone to them. Tax time can be particularly difficult for those of us with depression.
Why are the poor taxed so much?
In fact, because they spend all of their income rather than saving it, it works out that they pay a larger percentage of their income in taxes than many rich people. Rich people avoid taxes on a lot of their income because of tax breaks that poor people can't afford.
Many families sought to cope by planting gardens, canning food, buying used bread, and using cardboard and cotton for shoe soles. Despite a steep decline in food prices, many families did without milk or meat. In New York City, milk consumption declined a million gallons a day.
The U.S. economy shrank by a third from the beginning of the Great Depression to the bottom four years later. Real GDP fell 29% from 1929 to 1933. The unemployment rate reached a peak of 25% in 1933. Consumer prices fell 25%; wholesale prices plummeted 32%.
Unemployment soared. Families suffered. Marriage rates fell. The contraction began in the United States and spread around the globe.
As stocks continued to fall during the early 1930s, businesses failed, and unemployment rose dramatically. By 1932, one of every four workers was unemployed. Banks failed and life savings were lost, leaving many Americans destitute. With no job and no savings, thousands of Americans lost their homes.
