In 1993, William Kurt Hauser, a San Francisco investment analyst, presented his results from an incredibly interesting study.
Hauser had analyzed tax revenues in the United States over time and came to the conclusion that tax revenue as a percentage of GDP had remained around a narrow band of 19% since 1946.
That was astonishing. After all, over that same period, tax rates had been all over the place.
The top marginal tax rate was as low as 28% in the 1980s and as high as 94% right at the end of WWII.
But despite those extreme variations, overall tax revenue had barely changed.
To better understand why, try and imagine the economy as a giant pie. Hauser’s data shows that the government’s slice of the pie is always around 19%– no matter how big the pie (or how high or low taxes are).
That means that the obvious solution to increasing tax revenue is to grow the pie itself.
While a few places in the world (like Singapore) have figured this out, this productive mindset completely escapes nearly every major western government.
And in the Land of the Free, the cries for higher taxes are getting louder and louder.
In the US, almost every candidate supports a government-run healthcare and university system, and claims it should all be “free”.
Their solution to everything is more government, more regulation, and of course higher taxes– all things that shrink the pie instead of increasing it.
Some of the presidential candidates now support income tax rates of 70-90%.
Elizabeth Warren wants to go as far as taxing not just income, but also wealth (a policy that’s been dropped by virtually every “socialist” country in the world, by the way).
Some want higher estate taxes and some want an investment sur-tax… But they ALL want higher taxes.
The Bolsheviks simply don’t understand that their higher tax rates won’t actually increase tax revenue.
Again, the numbers undeniably show that the size of the government’s piece of the economic pie always remains 19% of GDP– no matter how high the tax rates are.
But that’s a concept they will never bother to consider.
Instead, they’ll just keep riding their Bolshevik high horses.
Of course, they tell you not to worry because their higher taxes will only hit rich people who earn over $400,000– you know, those greedy dentists and small business owners.
But taxing just the top 1% will barely make a dent in the budget required to fund all of these socialist programs.
So then they’ll start talking about taxing the top 5%. Then the top 10%. And soon these higher taxes will end up slamming right into the middle class.
The much-despised “Alternative Minimum Tax” is a great example; it was originally passed back in the 1960s specifically to tax the very wealthy. But today millions of people are ensnared by the AMT.
Even the US federal income tax itself is a great example.
When it was originally passed in 1913, federal income tax targeted wealthy people, and was only paid by the top 3% of income earners. 97% of Americans paid no federal income tax.
Today tens of millions of people in the middle class pay income tax.
And it will only get worse. Especially under the 2020 Democrats.