Hauser’s Law

Here is something that you most likely suspected was true.

The chart on this page, updating the evidence to 2007, confirms Hauser’s law. The federal tax yield (revenues divided by GDP) has remained close to 19.5 percent, even as the top tax bracket was brought down from 91 percent to the present 35 percent. This should cut the Gordian knot of tax policy debate.

Confirmation of Hauser Law

Notice just how flat that “Tax revenue” line is. Why would this be true? Well one reason, and also the reason we have a 67,000+ page tax law, is lobbyists. No matter what the stated tax rate, everyone lobbies for tax loopholes. The higher the tax rate, the greater the ROI on the cost of lobbyists. The money of the rich, instead of being invested in profit making, job producing enterprises, funnels to the loopholes. The other reason is human nature. Once someone tries to take more than 20% of what you have earned, you will look for alternate options. If you are a member of the very rich, you can afford some very expensive tax lawyers and accountants.

It is also easy to criticize the critics on the Wikipedia page. Social Security taxes are applied to the working class and they have no way to bypass the tax. Corporations and the rich can move their business or money elsewhere. In any case, the Hauser Law certainly shows our government spends a lot of resources for very little improvement in revenue. That should be the number one takeaway from the plot.

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