There's No Escaping Hauser's Law [Reagrdless of top tax rate, tax revenues are about 19% of GDP]

Wall St. Journal ^ | NOVEMBER 26, 2010 | W. KURT HAUSER

[grundle]

Tax revenues as a share of GDP have averaged just under 19%, whether tax rates are cut or raised. Better to cut rates and get 19% of a larger pie.

The Obama administration's budget projections claim that raising taxes on the top 2% of taxpayers, those individuals earning more than $200,000 and couples earning $250,000 or more, will increase revenues to the U.S. Treasury. The empirical evidence suggests otherwise. None of the personal income tax or capital gains tax increases enacted in the post-World War II period has raised the projected tax revenues.

Over the past six decades, tax revenues as a percentage of GDP have averaged just under 19% regardless of the top marginal personal income tax rate. The top marginal rate has been as high as 92% (1952-53) and as low as 28% (1988-90). This observation was first reported in an op-ed I wrote for this newspaper in March 1993. A wit later dubbed this "Hauser's Law."

Why? Higher taxes discourage the "animal spirits" of entrepreneurship. When tax rates are raised, taxpayers are encouraged to shift, hide and underreport income. Taxpayers divert their effort from pro-growth productive investments to seeking tax shelters, tax havens and tax exempt investments. This behavior tends to dampen economic growth and job creation. Lower taxes increase the incentives to work, produce, save and invest, thereby encouraging capital formation and jobs. Taxpayers have less incentive to shelter and shift income.

[AmusedBystander]

It would be great if Obama learned to read something other the Communist Manifesto. Something like this article would be nice.

[RightGeek]

Marxists avoid common sense like vampires avoid garlic

[Kickass Conservative]

Bush Tax Rate Cuts partially implemented in 2001 and finalized in 2003. 35% increase in Federal Tax Revenue from 2003 to 2008 with the Evil Rich paying a larger portion of overall Taxes collected.

Record Month to month job growth for a record 52 months with Unemployment averaging 5%. GDP in excess of 4% per year over the same period.

In 2006 with Unemployment reaching 5.4%, Nancy Pelosi famously says, “where are the jobs Mr. President?” Never heard her ask the same question of Pres__ent Obama when Unemployment peaked at 10% and settled down to a Democrat induced “manageable” 9.6%.

And to think all that happened after the Trillion Dollar plus economic impact of the 9/11 Attacks.

Pelosi and Reid take over in 2007 after obstructing any effort to reform the CRA fueled Fannie and Freddie in the three previous years and the Economy tanks. The good news of course is that Franklin Raines, Jamie Gorelick and (I believe) Rahm Emmanual pocketed tens of Millions of Dollars from their time “managing” Fannie and Freddie.

Coincidence, I think not.

[iowamark]

ping

[updatedscreenname]

We are about to see this in acton.
Income tax on small business owners is going from 15% to 39.6%. The 26.6% difference will be made up by cutting costs and layoffs. GDP will shrink as the domino effect kicks in.

[conservatism_IS_compassion]

Taxes are a price put on legitimacy; you pay the tax and the government lets you do the activity. But - and this is the thing that socialists cannot accept - the government does not have unlimited power to get tax revenue because the taxpayer does not have unlimited ability - still less, willingness - to provide that revenue. The government is a monopoly, that is true - but even a monopoly sets finite price rates so that sales of its product are not zero. After all, a monopolist who sells no product is no different from anyone else who doesn't sell the product.

Likewise, the government's price for legitimacy - its tax rate - must not be arbitrarily high if revenue is the object of the tax. There are cases - "sin taxes" in which not revenue but reduction of demand is actually the stated prime objective.

And in point of fact Obama speaks of high-bracket earning precisely as a "sin" to be suppressed. And the employees of the high earners are supposed not to notice the effect suppression of high earning has on employment.

[trebb]

In 2006 with Unemployment reaching 5.4%, Nancy Pelosi famously says, “where are the jobs Mr. President?” Never heard her ask the same question of Pres__ent Obama when Unemployment peaked at 10% and settled down to a Democrat induced “manageable” 9.6%.

But we did hear her tell us how we got more stimulus bang for the buck by increasing unemployment benefits and food stamps - which means we are in the biggest boom in history.

[griswold3]

Last tax year the fed collected 15% GDP revenue. That indicates their ‘legitmacy’.
There is a war going on over private property.

Capital Strike!

[texas booster]

Last tax year the fed collected 15% GDP revenue.

But the Feds spent 24% of GDP ...

[M Kehoe]

"Hauser's Law," or Laffer curve? Either way, the results are always the same.

5.56mm

[griswold3]

At that rate, how soon before interest on the deficit exceeds taxes collected? I recently heard the estimate but cannot find it.
Throughout our nation’s history, this battle has been raging. The government trying to raise revenue and the private sector limiting their liability. FDR’s war on the rich failed, just as any other leftist..er..ah..’Progressive’ will fail.

From Judge Learned Hand

“Anyone may arrange his affairs so that his taxes shall be as low as
possible; he is not bound to choose that pattern which best pays the
treasury. There is not even a patriotic duty to increase one’s taxes.
Over and over again the Courts have said that there is nothing sinister
in so arranging affairs as to keep taxes as low as possible. Everyone
does it, rich and poor alike and all do right, for nobody owes any
public duty to pay more than the law demands.”