12. Hoover’s policies changed a budget surplus into a deficit
In 1929, the first year of Herbert Hoover’s administration, the President inherited a budget surplus. Following the stock market crash, Hoover opted to reduce income tax rates by 1% of the 1929 rates when people filed their taxes in 1930. There was no federal withholding at the time, people filed their taxes and paid what they owed. Income tax refunds were unknown, since no money was withheld during the years. During 1930, Hoover established federal agencies and advisory committees, intended primarily to shore up the crumbling financial system. As he did so he increased federal spending, and the surplus of 1929 became a deficit in 1930.
By 1932 some conservative economists and politicians believed the steadily expanding deficit contributed to the continuing, and still worsening depression. Hoover asked Congress to increase federal income tax rates across the board. The act produced by Congress both increased the number of people owing taxes and the rates to determine the amount they owed. Hoover compared the act to similar actions during the First World War, calling them justified to “fight the depression, the misery and suffering from which are equally great”. In effect, Hoover compared the depression to a war, and asked Americans to rally around him as he led them to victory.