Economist William Hauser’s (Hauser’s law)study has shown that federal tax revenues since World War II have always been approximately 19.5% of GDP, regardless of the highest marginal tax rate. Higher marginal tax rates on the wealthy will not lead to higher tax revenues as the GDP will shrink accordingly. Krugman should also note that an economic boom was started in the 1960s when JFK lowered all marginal tax rates including those paid by the richest Americans.
The inmplications of Hauser's Law are bunk. There is over a 1% GDP difference between tax cut years and tax hike years (graph from this article) in collected federal revenue. That is a huge number in dollars. It would be an even larger difference if you factored out the Reagan payroll tax increases from the tax cut years.
Higher marginal tax rates on the wealthy will not lead to higher tax revenues as the GDP will shrink accordingly.
Except that GDP has been lowering as marginal income tax rates get lower and conversely historically higher GDP growth eras have typically also been higher marginal income tax rate areas (see this CRS report).
