Uh, no, they did not lower rates. They RAISED tax rates until after the Korean War. The ONLY taxes that were lowered were the effective tax rates on married couples filing jointly in 1948, those least likely to invest. . . not business taxes, not corporate taxes, not capital gains. Not taxes on individuals, married filing separate, or head of household, nope. In fact, capital gains? Up. Inheritance taxes? Up. The effect of the lowered rates passed in 1954 (notice the highest rates in the chart below were NOT altered until well into the 60s) did not have any appreciable effect until the second half of the 50s decade. For most people, the effective taxes were flat. It was only when Kennedy reduced the marginal rates in 62 was any real gain in the economy gained because of tax cuts. Look st the tax chart below for a typical small business income of $500k (based on 2012 earnings) normalized for the past one hundred years to see there WAS NO REDUCTION IN TAXES POST WWII. Sorry, it just did not happen. What DID happen is government spending, and hence government BORROWING—competing with the private sector for the investable dollar—shrank and interest rates dropped, freeing up capital! The government was no longer selling war bonds. . . Think like an economist.
The housing boom of the fifties, didn't really get going on till about 1954 when the GIs finished using the GI bill, started families and needed homes. Then, the building boom started, because they finally had jobs that could support a mortgage at the low interest rates the GI bill provided for them. . . also a result of WWII. The boom generated economic activity.
This era was part of my senior thesis. Your assumptions are wrong. I am a great believer in the Laffer Curve, but it requires a general overall reduction in taxes rates, not a change in deductions or exemptions for a preferred segment of the population—such as married couples or left-handed transvestites, or any group politicians want to favor over the general population of taxpayers. That did not happen. . . especially for the wealth creators.
In the chart, I selected a single taxpayer to eliminate any effect of preferential rates, exemptions, and deductions to show the pure rate.
