So I did a little research on the "phenomenon" you referred to, usually known as "Hauser's Law" (the proposition was first put forward in 1993 by William Kurt Hauser).
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One problem is that in order for the numbers to work, individual tax rates are usually compared with overall tax revenues. If you pull out corporate taxes it changes the results. More importantly, if you pull out taxes from social insurance programs like Social Security, the results change dramatically.
Actually, this critique is not aimed at Hauser's Law … only at the conservative assertion that raising taxes on the rich does not work. Hauser's law itself is perfectly true. Regardless of tax rates (in any component of that triad), total tax revenues have remained in a very narrow range for about 65 years. And there is probably a reason for that … one which has to do with basic human nature.
Which is why I have several criticisms of your *experts* thinking.
First, it seems to me that these so-called experts are ignoring any linkage between the various *tax* components. But they are linked in various ways. They do influence one another. Hauser's law may, in fact, reflect some inherent level of total tax revenue (as a percent of GDP) that Americans will accept. Go above that level and, one way or another, people will find a way to drive the total taxes, as a percentage of GDP, back down.
Most people inherently like the concept of private property. They like to own things. The right of ownership and private property were fundamentally important to this nation's founders. And if you take things or money away from such people, at some point they decide to call it theft. Since your sources indicate that during the last 65 years individual taxes have gone up slightly, it may be that lowering corporate rates during the same period is the only reason the government got away with raising social insurance. We might have revolted, otherwise. Remember, this country was founded because the British tried to impose a rather minor tax over what people were used to paying at the time (a few percent).
Also, the three tax components may more directly affect one another. For example, it may be that raising individual rates is part of the reason more social insurance was necessary. People had less money to build their own retirement package. One reason that both husband and wife now have to work to make ends meet is because the government takes too much from them. It didn't use to be that way. Keep taking more and we might have to put our children to work. Assuming of course that the higher taxes don't totally stop job growth so there are no jobs.
Which leads me to my second criticism. Where is what taxes do to GDP figured into these *experts'* analyses? Sure, they are dividing revenues by GDP but they aren't singling out what the tax rates caused the GDP to do. The level of taxes does impact the behavior of people and businesses, and that impacts GDP growth, and that impacts tax revenues. Tax revenues may be going up because GDP went up because tax rates went down and that stimulated growth. In fact, I can prove that with data from one of your sources:
http://www.angrybearblog.com/2010/11/hausers-law-is-extremely-misleading.html , in an example that also shows we must question the truthfulness of your sources.
That source published this graph
http://4.bp.blogspot.com/_8UVGnCIfO...oAy0Eg_r1dE/s1600/Hauser%27s_Law_Figure_1.bmp
and claims it shows that when taxes go up (supposedly the periods of red in the graph), revenues as a percentage of GDP go up. And, furthermore, that revenues in those periods are higher than the average revenues in the chart. Thus, they conclude that raising taxes isn't counter-productive but actually creates long term revenue growth.
But that chart is dishonest. Because during about half of the period from 1990 to 2001 (which is the majority of the identified red in the chart), taxes actually went down … not up as claimed or implied. Sure, from 1990 to 1995, when democrats at first controlled one house and then both houses of Congress, there were tax hikes, as well as lots of talk about enacting even higher taxes. But when Republicans gained control of the House and Senate in January of 1995, they promised and then forced through major tax cuts. So half of the largest block of red in that chart should actually be colored grey. Which makes me wonder about the accuracy of the other two red zones and the rest of what is claimed by that author.
Now (
this is very important) notice that during the first half of that time period, when taxes were increased, GDP remained stagnant (it only went from $6.5 trillion to $6.6 trillion). Those tax increases had a chilling effect on the behavior of businesses and people. But after 1995, when republicans promised to cut taxes and actually did cut taxes, GDP exploded. It rose from $6.6 trillion to almost $10 trillion by December 2000. It rose because taxes went down, not because taxes went up as the author claimed.
That chart is misleadingly used in another way. It is being used to suggest that raising individual tax rates in the 90's is what caused the percent of GDP collected in total taxes to go up. Indeed, this source (
http://taxvox.taxpolicycenter.org/2011/04/27/why-should-taxes-be-18-percent-of-gdp-3/ ) has a chart (
http://taxvox.taxpolicycenter.org/wordpress/wp-content/uploads/Bob-TaxVox-Apr-26-2011-shrunken3.gif ) that shows what each of the tax components did in the 1990 to 2001 timespan. And sure enough, you can see from that chart that the rise in total taxes is almost entirely due to a rise in individual income tax collections.
But be careful. That does not mean that individual tax rates went up. After 1995, when most of the increase in tax revenues occurred, they went down. What happened is that even though they cut tax rates, they still didn't reduce the top rates below the 18-19% that total tax revenues were at when they cut the individual rates. So when the GDP took off and taxes were collected on all that extra money being made, those in the top brackets who by far paid most of the taxes on all that extra GDP, paid them
at marginal tax rates that were still far above the average 18-19% tax rate in the total tax revenue chart. So the total tax revenue number naturally rose. In short, contrary to the claim or suggestion of your source, higher taxes did not result in greater tax revenues.
And the biggest fallacy of all in what Obama and your sources claim is the notion that you can reduce the deficit and debt mostly by taxing the rich. I suggest you watch this video if you want to see why that is utter nonsense and an impossibility:
http://www.youtube.com/watch?v=661pi6K-8WQ
Finally, what world do you live in? Do you really think that the wealthiest 1% (or even 5%) will be the only ones to pay higher taxes if Obama and his *true believers* get their way? They may temper their verbage in the most public forums, but behind the scenes they are talking among themselves about taxing the less than *uber rich* … and corporations … and small businesses … and just about everyone who isn't already dependent on the government. And since business taxes will drive up costs that are passed on to consumers, even the very poor will end up paying for those higher taxes.
But perhaps that's ok … if you are Obama and the democrat leadership.
Because, in my opinion, their real goal isn't to reduce the debt or balance the budget, but to make people more dependent on them.
There is also a simple scale problem -- graphs typically used to illustrate Hauser's Law show the revenue on a 100-point scale, but the difference between 14% of GDP and 21% of GDP is actually quite large in terms of revenue.
This is simply handwaving. Scale has nothing to do with complaining that the data remains within the 14% to 21% range from 1945 to 2009 (with an average closer to 18% than 19.5%), yet under Obama's Extended Baseline Scenario, according to tha CBO report you linked, starting about 2015 revenues will exceed 21% and continue climbing (matching spending) from then on (reaching about 24% twenty years later). It simply defies what history shows happens with taxes and revenue. It's FANTASY, no matter what sources you pull out of your *hat*.
At the proper scale, you can also see the correlation between tax increases and increased revenue and tax decreases and decreased revenue.
Only if you cherry pick the taxes.
Only if you ignore what taxes really do to economic growth.
And only if you ignore all the counter examples that have been demonstrated repeatedly on threads just like this one.
