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Birth of a MarketThe U.S. Treasury Securities Market from the Great War to the Great Depression$
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Kenneth D. Garbade

Print publication date: 2012

Print ISBN-13: 9780262016377

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262016377.001.0001

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Treasury Finance during the 1920s

Treasury Finance during the 1920s

(p.146) (p.147) 11 Treasury Finance during the 1920s
Birth of a Market

Kenneth D. Garbade

The MIT Press

This chapter provides an overview of federal tax policy during the 1920s and describes how Treasury officials funded the debt reduction program. By the end of World War I the national debt stood at $25 billion and tax rates were so high that they significantly dampened investment incentives. In a series of three revenue measures adopted between 1921 and 1926, Congress eliminated the excess profits tax and dramatically reduced surtaxes on individual incomes. Congress also effected significant expenditure reductions. Spending for the War and Navy departments plunged from $11.3 billion in the fiscal year 1919 to $1.7 billion in the fiscal year 1920, and continued to fall until the middle of the decade. Spending in other categories also fell during the first half of the decade. The result was a surplus in every fiscal year from 1920 to 1930.

Keywords:   tax policy, debt reduction, national debt, public finance, Congress, fiscal policy

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