Posted on 10/13/2009 10:39:47 AM PDT by Son House
Will increasing tax rates on the rich increase revenues, or hold back the economy?
Mr. Hauser uncovered the means to answer these questions definitively. On this page in 1993, he stated that "No matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5% of GDP." What a pity that his discovery has not been more widely disseminated.
The chart nearby, updating the evidence to 2007, confirms Hauser's Law. The federal tax "yield" (revenues divided by GDP) has remained close to 19.5%, even as the top tax bracket was brought down from 91% to the present 35%. This is what scientists call an "independence theorem," and it cuts the Gordian Knot of tax policy debate.
The data show that the tax yield has been independent of marginal tax rates over this period, but tax revenue is directly proportional to GDP. So if we want to increase tax revenue, we need to increase GDP.
What happens if we instead raise tax rates? Economists of all persuasions accept that a tax rate hike will reduce GDP, in which case Hauser's Law says it will also lower tax revenue. That's a highly inconvenient truth for redistributive tax policy, and it flies in the face of deeply felt beliefs about social justice.
Because Mr. Hauser's horizontal straight line is a simple fact, it is ultimately far more compelling. It also presents a major opportunity. It seems likely that the tax system could maintain a 19.5% yield with a top bracket even lower than 35%.
Putting it a different way, capital migrates away from regimes in which it is treated harshly, and toward regimes in which it is free to be invested profitably and safely. In this regard, the capital controlled by our richest citizens is especially tax-intolerant.
(Excerpt) Read more at online.wsj.com ...
Did you get my apology? I really goofed on my first reply to you.
Yes, thank you. I got in a rush for class, I’m actually working on a programming degree, unfortunately Republicans have neglected economic lessons for the masses, and now it’s up to us, like ‘Horton Hears a Who’.
Did the same thing to myself yesterday, see the bottom of this post#10 and the next 2 post for a laugh,
http://www.freerepublic.com/focus/chat/2360981/posts?page=10#10
I guess the real important part is to get some basic economics out so we can all challenge Democrats before they ruin the United States as we know it
I would suspect that there is little variation in the constant rate.
It would also be interesting to see how Hauser's Law works in even more socialized economies such as those in Europe. Again, I suspect that the empirical evidence would support it. While some cultures may have a higher tolerance for taxation (and others a lower tolerance), and while the rate may vary by a couple of percent more or less according to these cultural tolerances, human nature is to maximize individual benefit.
Some of those old enough to remember might recall Nikita Khrushchev's grand experiment of allowing collective farm workers to cultivate a private plot of perhaps a half acre or so per family in the 1960's as a means to address Russia's chronic shortage of agricultural production in the world's largest land mass.
These private plots made up something like 3% of the land area under cultivation but produced over half of the saleable produce. It turned out to be a major embarrassment for the Communist Party, but they were afraid to end the program as it was the only thing that kept the country from starvation at the time.
bttt
“The avoidance of taxes is the only intellectual pursuit that carries any reward.”
(John Maynard Keynes)
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