John Skorburg shares with us his letter to the editor of the Chicago Sun-Times.....
Letter to the Editor
Terry Savage is right (Why hiking taxes on the rich doesn’t work, September 13) and for many different reasons!
Economist William K. Hauser also documented this phenomenon in 1993, writing for the Hoover Institution. “No matter what the (income) tax rates have been, in postwar America (federal) tax revenues have remained at about 19.5% of GDP.”
Wainwright Economics has confirmed “Hauser’s Law” repeatedly in graphic form, the most recent time in the WSJ on May 17. It’s amazing how this economic truth has worked. In 1950, the top marginal tax rate on the ‘rich’ was 85%. And the federal share of our economic pie (revenue as a percentage of GDP) was slightly under 20%. In the late 1960’s, the top marginal tax rate declined to 70%, while the feds share stayed stable at 19.5%. When the top marginal tax rate declined to under 30% in 1990, federal tax revenues remained at 19.5%.
Based on this effect, the federal government could hike the marginal tax rate from just under 40% (today) to any higher number, and not move its share of the pie (revenue wise) above 20% of the economy.
Since lower marginal tax rates bring in the same percentage of revenues for the federal government, why try to move them even higher? Perhaps the rich are not the problem, but excess government spending could be!
John W. Skorburg, economist and policy advisor, The Heartland Institute, Chicago.