The "Higher Tax Rates = More Govt. Revenue" Myth - Debunked

[tooAlive]

I'm sure it's no surprise that we just recorded record tax revenues this year.

Tax revenue to hit record this year. So is spending 'the problem'? - CSMonitor.com

Although the left may argue that tax revenues would be even higher had tax rates also been higher. They may even point to the period in the '50s when tax rates were in the 90% range, and say we did perfectly fine. Great, in fact.

But the truth is those rates were irrelevant, as nobody ever paid anywhere near those rates. Although that's a totally different discussion that deserves it's own thread. Here's the main point in this thread:

Regardless of what tax rates we've had throughout history, tax revenue has remained constant at roughly ~19.5% of GDP.

Hauser?s Law | Hoover Institution

See? Tax revenue generated by the government has remained the same throughout history; even with astronomically-high marginal tax rates.

Hauser uncovered the means to answer these questions definitively. In a Wall Street Journal article in 1993, he stated that “no matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5 percent of GDP.” What a pity that his discovery has not been more widely disseminated.

The chart on this page, updating the evidence to 2007, confirms Hauser’s law. The federal tax yield (revenues divided by GDP) has remained close to 19.5 percent, even as the top tax bracket was brought down from 91 percent to the present 35 percent. This should cut the Gordian knot of tax policy debate.

This certainly isn't popular among politicians pushing for higher tax rates on the wealthiest Americans, as their talking points would go up in smoke when we analyzed history.

 

[tooAlive]

Nobody has anything to say?

 

[Care4all]

I'm sure it's no surprise that we just recorded record tax revenues this year.

Tax revenue to hit record this year. So is spending 'the problem'? - CSMonitor.com

Although the left may argue that tax revenues would be even higher had tax rates also been higher. They may even point to the period in the '50s when tax rates were in the 90% range, and say we did perfectly fine. Great, in fact.

But the truth is those rates were irrelevant, as nobody ever paid anywhere near those rates. Although that's a totally different discussion that deserves it's own thread. Here's the main point in this thread:

Regardless of what tax rates we've had throughout history, tax revenue has remained constant at roughly ~19.5% of GDP.

Hauser?s Law | Hoover Institution

See? Tax revenue generated by the government has remained the same throughout history; even with astronomically-high marginal tax rates.

Hauser uncovered the means to answer these questions definitively. In a Wall Street Journal article in 1993, he stated that “no matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5 percent of GDP.” What a pity that his discovery has not been more widely disseminated.

The chart on this page, updating the evidence to 2007, confirms Hauser’s law. The federal tax yield (revenues divided by GDP) has remained close to 19.5 percent, even as the top tax bracket was brought down from 91 percent to the present 35 percent. This should cut the Gordian knot of tax policy debate.

This certainly isn't popular among politicians pushing for higher tax rates on the wealthiest Americans, as their talking points would go up in smoke when we analyzed history.

So if our tax collection as a percent of gdp was 19.5% you'd be okay with that?

The reason I ask is that as of the last year I could find, 2011, our taxes collected compared to gdp was 14.8% which indicates that tax collection is down GREATLY compared to the average tax collection percent of 19.5%.... tax revenues are down 32% compared to our norm.... THAT'S an awful lot, don't ya think?

 

[Katzndogz]

Taxes are up, but there are fewer taxpayers. That means the overall revenue from taxes has to be down.

 

[Wacky Quacky]

That graph also shows that lowering taxes doesn't have any impact at all. So can we drop these turds (raising or lowering taxes) and move on to something that will actually have an impact, like eliminating deductions?