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You Can't Soak the Rich[No Matter the Tax Rate, Tax Revenues Remained about 19.5% of the GDP]
The Wall Street Journal ^ | MAY 20, 2008 | By DAVID RANSON

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 ...


TOPICS: Business/Economy; Front Page News; News/Current Events; Politics/Elections
KEYWORDS: economics; economy; gdp; hauser; hauserlaw; kauserslaw; laffercurve; rich; soak; tax
"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."

^^^Except Economists of White House and Democrat persuasions

There is another chart referenced at the article link.

Pay attention to the GDP, Gross Domestic Product

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1 posted on 10/13/2009 10:39:48 AM PDT by Son House
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To: Son House

Its called ....Going Galt

A reaction to taxing the Rich Entrepreneurs. The people rule, even the rich people.


2 posted on 10/13/2009 10:44:53 AM PDT by 4Speed
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To: Son House

BTTT


3 posted on 10/13/2009 10:46:30 AM PDT by WOBBLY BOB (ACORN:American Corruption for Obama Right Now)
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To: Son House

Your article about ‘Hauser’s Law’ is one of my favorites.
The ‘Progressives’ actually believe that tax revenues will go up if you increase the tax rate.Deficit spending is a future tax increase. Anyone operating a small business knows what the future holds. The Math never lies.


4 posted on 10/13/2009 10:48:06 AM PDT by griswold3 (You think health care is expensive now? Just wait till it's FREE!)
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To: Son House

And as income tax renvenue stays flat, the way to grow overall tax collections is through capital gains. Not by raising rates, but by allowing the economy to flourish....

hh


5 posted on 10/13/2009 10:48:53 AM PDT by hoosier hick (Note to RINOs: We need a choice, not an echo....Barry Goldwater)
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To: Son House

Ping


6 posted on 10/13/2009 10:54:22 AM PDT by Truth is a Weapon (Truth, it hurts soooo good!)
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To: Son House

Income Tax Revenue as a Percent of GDP is not the same thing as Total Tax Revenue.

Let’s see some charts showing the correlation between marginal tax rates and Total Tax Revenue. (Lower rates = MORE Total Revenue)

All this chart says is if you raise tax rates, you tank the GDP, so Tax Revenue declines about the same percentage as GDP declined.


7 posted on 10/13/2009 11:19:01 AM PDT by Auntie Dem (Hey! Hey! Ho! Ho! Terrorist lovers gotta go!)
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To: 4Speed
Paraphrasing Rush from one of his books, "If you took all the money from all the rich, and divided it out amongst the "poor", in a period of time, the same people would be rich again, and those who were "poor" would again be poor.

It's not who has the money, it's how the money is handled.

All that stimulus money - once distributed - will wind up right back where it started, in the hands of businesses.
8 posted on 10/13/2009 11:26:52 AM PDT by FrankR (To Congress: You cram it down our throats in '09, We'll shove it up your ass in '10!)
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To: Son House
Good article, worth reposting.

Cross-references:

You Can't Soak the Rich [Regardless of tax rates, federal tax revenue is always 19.5% of GDP] - FR / WSJ, 2008 September 22, by David Ranson

We are on The Laffer Curve - FR / Science Mag, 2009 September 16, S. Carroll

Hauser's Law together with the Laffer Curve is a very powerful combination.

9 posted on 10/13/2009 11:27:35 AM PDT by CutePuppy (If you don't ask the right questions you may not get the right answers)
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To: Auntie Dem

This is what I see

Lower rates = Larger GDP = more jobs = more opportunity = MORE Total Revenue


10 posted on 10/13/2009 11:36:50 AM PDT by Son House (OcarterCare by Congress will make all Americans = Wards of the State)
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To: CutePuppy

Thanks for that, hopefully someone brighter than I will find some more current info on the GDP and post


11 posted on 10/13/2009 11:39:21 AM PDT by Son House (OcarterCare by Congress will make all Americans = Wards of the State)
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To: Son House
"No matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5% of GDP."

Sort of a meaningless number. Would you rather have 19% of a robust and positive GDP or 19% of a weak and negative GDP? The goal is a robust and positive GDP. The 2003 tax cuts by 2006 had increased federal revenue by a little more than 40% while the GDP took off positive.

12 posted on 10/13/2009 11:56:59 AM PDT by avacado
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To: avacado

The 2003 tax cuts by 2006 ... while the GDP took off positive.

^
and tax increases move the GDP negative, the 19% of a weak and negative GDP we’ve got with Democrat policies


13 posted on 10/13/2009 12:05:31 PM PDT by Son House (OcarterCare by Congress will make all Americans = Wards of the State)
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To: Son House
"and tax increases move the GDP negative"

They did not. GDP shot up to over 7% growth in one quarter. You need to fact check before posting that nonsense.

14 posted on 10/13/2009 12:07:19 PM PDT by avacado
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To: Son House

15 posted on 10/13/2009 12:22:49 PM PDT by avacado
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To: avacado

Soak the rich. The rich leave.


16 posted on 10/13/2009 12:24:49 PM PDT by arthurus ("If you don't believe in shooting abortionists, don't shoot an abortionist." -Ann C.)
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To: Son House
"and tax increases move the GDP negative, the 19% of a weak and negative GDP we’ve got with Democrat policies"

My apologizes!!! I read your post wrong. I thought you said tax cuts caused a negative GDP. My apologizes!

17 posted on 10/13/2009 12:25:19 PM PDT by avacado
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To: Auntie Dem

The chart is correct. As rates fall the economy grows and the net difference to the treasury as a percentage of GDP remains constant. Yes, the total receipts to the treasury increased as the economy grew.


18 posted on 10/13/2009 12:43:50 PM PDT by Ouderkirk (Democrats: the party of Slavery, Segregation, Sodomy and Sedition)
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To: Auntie Dem
Let’s see some charts showing the correlation between marginal tax rates and Total Tax Revenue. (Lower rates = MORE Total Revenue)

That's implicit in the chart shown.

19 posted on 10/13/2009 12:47:34 PM PDT by CharacterCounts (November 4, 2008 - the day America drank the Kool-Aid)
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To: avacado

Thanks for posting that, funny to think McCain’s economic team couldn’t explain any of this before he lost to any tax and spend Democrat, I can only remember McCain saying “he wants to raise your taxes”, too little, to late


20 posted on 10/13/2009 1:10:39 PM PDT by Son House (OcarterCare by Congress will make all Americans = Wards of the State)
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To: Son House

Did you get my apology? I really goofed on my first reply to you.


21 posted on 10/13/2009 1:21:22 PM PDT by avacado
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To: avacado

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


22 posted on 10/13/2009 5:14:28 PM PDT by Son House (OcarterCare by Congress will make all Americans = Wards of the State)
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To: griswold3
What Kurt Hauser has essentially done is to have proven the theory of Art Laffer's curve with empirical evidence. I think it would be interesting to see the data going back to 1913, when the income tax was first adopted and perhaps even before.

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.

23 posted on 10/13/2009 8:11:24 PM PDT by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: Son House

bttt


24 posted on 10/14/2009 12:16:55 AM PDT by Pagey (B. Hussein Obama has no experience running anything, except his pedestrian mouth.)
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To: Vigilanteman

“The avoidance of taxes is the only intellectual pursuit that carries any reward.”
(John Maynard Keynes)


25 posted on 10/14/2009 6:53:07 AM PDT by griswold3 (You think health care is expensive now? Just wait till it's FREE!)
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