Revenue Act of 1924 Continues Mellon Tax Cuts for Wealthy, Lowers Top Rate to 46%

President Calvin Coolidge signs the Revenue Act of 1924, the second installment of Treasury Secretary Andrew Mellon’s systematic campaign to slash taxes on the wealthy. The act reduces the maximum income tax rate from 58 percent to 46 percent on incomes over $500,000 (raised from the previous $200,000 threshold), cuts estate taxes, and provides preferential treatment for capital gains. The legislation continues the post-World War I rollback of progressive taxation that Mellon initiated with the Revenue Act of 1921, implementing his theory that lower rates on the wealthy will stimulate economic growth through increased investment—an early articulation of “supply-side” economics that later becomes foundational to conservative tax policy.

Mellon argues that high wartime tax rates drive wealthy individuals to hide income in tax-exempt securities rather than productive investments, and that lower rates will paradoxically increase revenue by encouraging compliance and economic expansion. Progressive critics, including Senator Robert La Follette, denounce the cuts as a “device to relieve multi-millionaires at the expense of other taxpayers,” arguing that the benefits flow overwhelmingly to a tiny elite while doing nothing for ordinary workers. The act passes despite Democratic opposition because Republicans control both chambers of Congress and frame tax reduction as economic stimulus during the 1924 election year.

The 1924 Revenue Act accelerates wealth concentration during the 1920s boom, contributing to the speculative bubble that culminates in the 1929 crash. The combination of slashed income taxes, reduced estate taxes, and capital gains preferences enables unprecedented accumulation at the top of the income distribution while starving government of revenue needed for public investment. Mellon serves as Treasury Secretary from 1921 to 1932 under three presidents, with one senator quipping that “three presidents served under Mellon,” capturing the financier’s extraordinary influence. The 1924 act represents a crucial step in Mellon’s multi-year campaign that ultimately reduces the top marginal rate from 73 percent in 1921 to 24 percent by 1929, fundamentally restructuring the tax code to favor wealth over work.