Steady State Taxation

Today's WSJ has an article discussing a study dating back to 1993 by economist Kurt Hauser. Hauser compared the top income tax rate to total tax revenues as a percentage of the US GDP. The result: despite the fact that the top tax rate (which at least as of now accounts for the lion's share of tax revenues collected, since we have a highly progressive income tax system) has varied from 91% to 35% over the last sixty years, total tax revenues are always at about 19.5% of GDP. Looking at the graph, the lack of correlation is truly startling.


The article's conclusion is that raising the taxes on "the rich" is not nearly as effective in raising total tax receipt dollars as pursuing policies that result in increased GDP. For reference, the GDP (in 2000 inflation adjusted dollars) for the same period is this: