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dkf

(37,305 posts)
Sun Sep 9, 2012, 08:39 AM Sep 2012

No matter what the Maximum tax rate has been, we've never collected much more than 20% of GDP



Federal tax revenues have averaged 19.6 percent of GDP since World War II. As the chart above shows, federal receipts broke the 20 percent ceiling only once, reaching 20.6 percent during the tech boom of 2000.

This has led many economists to argue that it is irresponsible for the U.S. to make long-term commitments to expenditure levels above about 20 percent of GDP. Nonetheless, government expenditure was 25.5 percent of GDP in 2011 and is projected to be more than 24 percent this year.

The 20 percent ceiling for government revenue holds despite a wide variation in tax rates. In the postwar period, the highest personal income tax rates have been as high as 92 percent and as low as 28 percent, while corporate tax rates have ranged from 35 to 53 percent.

This means that raising taxes to address mounting U.S. debt is not an option. While it may seem fair politically, it is unrealistic and counterproductive in practice.

At some point, apparently around 20 percent of GDP, increased tax rates are offset by shrinkage in the tax base.

https://www.aier.org/article/7815-raising-taxes-won%E2%80%99t-help


37 replies = new reply since forum marked as read
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No matter what the Maximum tax rate has been, we've never collected much more than 20% of GDP (Original Post) dkf Sep 2012 OP
Why would a progressive with years on DU still be falling for the much-discredited Laffer curve? Scuba Sep 2012 #1
This is just reality. It seems like pretty straight forward data to me. dkf Sep 2012 #2
Why would you post such drivel? Scuba Sep 2012 #4
I'm not giving you theoretical economics...these are results and data. dkf Sep 2012 #8
If the gap between federal expenses and tax receipts is the problem bhikkhu Sep 2012 #31
dkf is a panicking conservative alcibiades_mystery Sep 2012 #3
Nailed it. Scuba Sep 2012 #5
Just trying to inject some reality. I don't know why that is considered Neocon or whatever. dkf Sep 2012 #7
Looks like madokie Sep 2012 #6
I didn't give Clinton enough credit when we were living through his terms. dkf Sep 2012 #9
Unlike me I was totally caught up in Clintonism madokie Sep 2012 #25
Uhh...according to your own data, we're not even collecting that much. strategery blunder Sep 2012 #10
Oh I fully agree with going back to Clinton rates. dkf Sep 2012 #11
Your OP bore no such qualification strategery blunder Sep 2012 #15
I tend to want the data or piece to speak for itself. dkf Sep 2012 #17
Why bother to post it then? strategery blunder Sep 2012 #22
The author (research intern) of the article is doubtless not an expert. LiberalFighter Sep 2012 #12
She is a research analyst not research intern. Geez. dkf Sep 2012 #14
It is still hogwash to suggest that they are only able to collect taxes at about the 20% GDP rate. LiberalFighter Sep 2012 #36
Nah, the percentage collected rose under both Reagan and Shrub Progressive dog Sep 2012 #13
That is what is quite striking. All those changes in rates and different payroll taxes and dkf Sep 2012 #16
Seems the argument is a stupid straw man. ProSense Sep 2012 #19
Indeed, the article contradicts its OWN data strategery blunder Sep 2012 #23
No it is not striking unless 20% is a magic number Progressive dog Sep 2012 #21
Let me explain. dawg Sep 2012 #18
Funny the piece discusses Sweden... dkf Sep 2012 #26
You are being intentionally misleading. dawg Sep 2012 #29
Just trolling as always. Why the fuck it's still allowed to post here is beyond me.nt Guy Whitey Corngood Sep 2012 #33
Shows how well Clinton did PowerToThePeople Sep 2012 #20
A lot more people were paying more in taxes and dkf Sep 2012 #27
Let me see if I have this right... DippyDem Sep 2012 #24
You have it exactly right tkmorris Sep 2012 #28
Wotta load of crap hfojvt Sep 2012 #30
More conservacrap from the "loyal opposition". Egalitarian Thug Sep 2012 #32
This is Art Laffer BS. Odin2005 Sep 2012 #34
"The 1933 founded libertarian institute located in Great Barrington, Massachusetts, conducts Guy Whitey Corngood Sep 2012 #35
What's missing here is a graph of GDP over the same period. NashvilleLefty Sep 2012 #37
 

Scuba

(53,475 posts)
1. Why would a progressive with years on DU still be falling for the much-discredited Laffer curve?
Sun Sep 9, 2012, 08:42 AM
Sep 2012

Don't you read what's posted here? Or are you trying to undermine the case for higher taxes on the wealthy?

 

dkf

(37,305 posts)
2. This is just reality. It seems like pretty straight forward data to me.
Sun Sep 9, 2012, 08:45 AM
Sep 2012

Why do you not give the numbers any credit?

 

dkf

(37,305 posts)
8. I'm not giving you theoretical economics...these are results and data.
Sun Sep 9, 2012, 08:57 AM
Sep 2012

If you don't think the numbers are correct then find me some to refute them.

And frankly I was looking for some other data and happened upon this piece. I find it interesting and relevant. You are free to disbelieve if you so choose.

bhikkhu

(10,713 posts)
31. If the gap between federal expenses and tax receipts is the problem
Sun Sep 9, 2012, 01:53 PM
Sep 2012

- which is what one would think, looking at the significant current gap, then how is a balanced approach - raising taxes and limiting spending - not a good idea? I don't quite get the point.

In practice, we'd have much less of a gap if the bush tax cuts on the wealthy had been allowed to expire, as the president (and just about everyone else) wanted. and then on the spending side, ending two wars and reforming healthcare easily (where there is a will!) make up the remaining difference, in the long term.

 

alcibiades_mystery

(36,437 posts)
3. dkf is a panicking conservative
Sun Sep 9, 2012, 08:47 AM
Sep 2012

He was hoping for an "I told you so" election night, but it's slipping away. So, naturally, the increasingly transparent ramping up of neocon economics and Friedmanism in all its sundry forms.

 

dkf

(37,305 posts)
7. Just trying to inject some reality. I don't know why that is considered Neocon or whatever.
Sun Sep 9, 2012, 08:54 AM
Sep 2012

It always seems like the 90%+ rate is thrown out as some sort of solution to our revenue shortfalls but it doesn't seem to work. I hate to see false promises is all.

 

dkf

(37,305 posts)
9. I didn't give Clinton enough credit when we were living through his terms.
Sun Sep 9, 2012, 09:07 AM
Sep 2012

He is our Ronald Reagan...definitely growing to myth like stature. I'm glad.

madokie

(51,076 posts)
25. Unlike me I was totally caught up in Clintonism
Sun Sep 9, 2012, 10:48 AM
Sep 2012

I thought the world of him then and I have to admit still 'til today

strategery blunder

(4,225 posts)
10. Uhh...according to your own data, we're not even collecting that much.
Sun Sep 9, 2012, 09:09 AM
Sep 2012

We're not even trying to tax at 20% of GDP. The feds are currently taking in about 17%. Therefore, your own data suggests there is room to raise taxes while still remaining at or under this theoretical ceiling of taxes collected as percentage of GDP. Also, I would note that when the federal government was taking in 20+% of GDP, the country was actually on track to pay off the Reagan National Debt in a reasonable amount of time. Instead, dimson blew the surplus on tax cuts for the rich and making his war, instead of raising taxes to pay for the war, as had been done just about every other time before in American history.

Would that fully close the budget deficit by itself? No. Yet note that federal expenditures remained fairly steady around 20% until the economy went in the toilet under dimson's final year in office, whereupon the deficit became swollen by automatic stabilizers, stimulus, and a reduced tax base. This should be a temporary condition, but will persist as long as the economy remains moribund. Government expenditure spiked so high as a percentage of GDP because the GDP is in the crapper and the crappy economy puts additional demand on the social safety net, such as it is.

If sequestration takes hold and the Pentagon (heavens forbid!) has to reduce its wasteful weapons procurement, the expenditure side will dip a bit. If there is any part of the federal government with fat to be trimmed, it is the Pentagon.

I'm no economist, but I know how to read a graph. No sale.

 

dkf

(37,305 posts)
11. Oh I fully agree with going back to Clinton rates.
Sun Sep 9, 2012, 09:46 AM
Sep 2012

That seems the optimal arrangement that produced the best revenue.

However thoughts of keeping spending as is and taxing above Clinton rates may not work based on previous experience. That is what I see as being misleading.

strategery blunder

(4,225 posts)
15. Your OP bore no such qualification
Sun Sep 9, 2012, 10:03 AM
Sep 2012

I think you might have been simply quoting four paragraphs of your source without adding much if anything of your own input (I didn't bother to look, because I immediately saw the contradiction between cited data and the slant of the piece), but the OP contained no hint of "There is room to raise taxes, but only to Clinton-era rates."

Instead, it said, and I quote, "This means that raising taxes to address mounting U.S. debt is not an option."

That is an absolute statement against raising taxes. There is no nuance there. I pointed out the data contradicted the apparent thesis of the OP.

I don't think anyone with any serious political clout is suggesting hiking the top marginal rate into the 90s, as it was under Eisenhower. Most of the "serious" discussion about increasing taxes that I can see emanating from the Beltway revolves around simply letting the dimson tax cuts expire, and going back to Clinton-era rates, or some modified version thereof (such as keeping lower-and-middle income tax breaks, but letting tax breaks for the wealthy expire as scheduled). So the article, while opposing any tax increase, attacks a strawman of raising taxes to wholly unrealistic levels, while contradicting its own data (or did you pull the graph separately?) that suggests there is some maneuvering room on the issue.

Indeed, by looking at that same graph, federal receipts as a percentage of GDP are somewhat lower than they have historically been (17% vs. an average that seems around 18%).

 

dkf

(37,305 posts)
17. I tend to want the data or piece to speak for itself.
Sun Sep 9, 2012, 10:13 AM
Sep 2012

Sometimes I don't even agree with it, I just find it interesting.

But I am in favor of getting rid of all Bush cuts no matter that I pay more. I'd rather do that then land up with an insolvent country.

Yes taxes are currently too low, spending is also too high and with our anemic economy I don't see growing into our spending.

strategery blunder

(4,225 posts)
22. Why bother to post it then?
Sun Sep 9, 2012, 10:31 AM
Sep 2012

I could understand posting this piece if there were serious and credible proposals to jack taxes up to quickly deal with the debt, but no such proposals are on the horizon. The only talk of tax increases emanating from credible sources is simply a reversion of some kind to the Clinton-era rates, which, the data suggest, should not conflict with the author's premise the federal tax burden should be kept at or below 20% of GDP.

The only motive that I can perceive for posting is an opposition to tax increases that don't seem forthcoming. Sure, spending is swollen by military expenditures and stimulus at the moment, the latter of which is still necessary if the economy is to have any hope of recovering before a "lost decade" of growth during which practically no private economic activity except debt servicing/retirement occurs. But the article makes no suggestion of spending cuts, and opposes tax increases (and yes, I did just now actually go to read the entire thing, as it became necessary to respond to you completely).

Sure, the raw graph is interesting, even if it suggests a conclusion opposite the author. I really gotta wonder about the logic of posting a no-new-taxes piece on DU, especially with contradictory data however. And I don't get the vibe from your responses to other posters that this thread was posted with the intent of illustrating conservatives' contradictions on economic theory and policy.

LiberalFighter

(50,806 posts)
12. The author (research intern) of the article is doubtless not an expert.
Sun Sep 9, 2012, 09:47 AM
Sep 2012

Increased tax rates are offset by shrinkage in the tax base? She doesn't explain how that makes sense. The only way the tax base is shrunk is when people don't have taxable income.

And to say that the 20 percent ceiling for revenue holds despite variation in tax rates is stupid too. It is not the result of revenue only achieving about 20 percent as if by magic. Budgets are created based on projected tax revenue based on tax rates. They have already determined how much revenue could be created if they increased tax rates on specific income or eliminated loopholes. And the projections would eliminate the debt or start the process.

IMO the article was written to confuse people into thinking that there shouldn't be additional tax rates in the upper incomes. By providing a fake reason why it won't work.

 

dkf

(37,305 posts)
14. She is a research analyst not research intern. Geez.
Sun Sep 9, 2012, 10:01 AM
Sep 2012

And this is historical data, not theory. In the past, no matter the tax rates, we have collected taxes at a maximum of 20.6% of GDP.

LiberalFighter

(50,806 posts)
36. It is still hogwash to suggest that they are only able to collect taxes at about the 20% GDP rate.
Sun Sep 9, 2012, 05:26 PM
Sep 2012

Taxes are structured to collect an amount within a range. And that structure can be changed to stay within that range.

To say that only about 20% can be collected regardless of the tax structure is wrong. Congress has the data of tax filers and knows how much can be collected at each bracket. And they can increase or decrease how much will be collected. The fluctuation will most likely be due to unemployment rates.

Progressive dog

(6,899 posts)
13. Nah, the percentage collected rose under both Reagan and Shrub
Sun Sep 9, 2012, 09:51 AM
Sep 2012

Doesn't show who is paying those taxes, does it? Doesn't show the loopholes, does it? Doesn't account for the increases in SS or Medicare taxes, does it? Doesn't account for tax expenditures to corporations and the wealthy, does it?
Doesn't say how many economists, does it?
What a stupid argument.

 

dkf

(37,305 posts)
16. That is what is quite striking. All those changes in rates and different payroll taxes and
Sun Sep 9, 2012, 10:04 AM
Sep 2012

Exemptions and credits and we max out at around 20%.

ProSense

(116,464 posts)
19. Seems the argument is a stupid straw man.
Sun Sep 9, 2012, 10:24 AM
Sep 2012
That is what is quite striking. All those changes in rates and different payroll taxes and

Exemptions and credits and we max out at around 20%.

I mean, what's the point? Everyone knows the debt and deficit are climbing disproportionately to revenues.

Why focus on the 20 percent number when current receipts fell by about four percent from that point recently?

In our most properous years receipts were brought in line with spending, and those include years where the top tax rates were as high as 90 percent.

The chart shows nothing about how distorted and skewed the receipts and spending have become, how spending is focused on all the wrong things and how the rich are no longer paying their fair share.

<...>

Back in the 1950s, when the top marginal tax rate was more than 90 percent, real annual growth averaged more than 4 percent. During the last eight years, when the top marginal rate was just 35 percent, real growth was less than half that. Altogether, in years when the top marginal rate was lower than 39.6 percent — the top rate during the 1990s — annual real growth averaged 2.1 percent. In years when the rate was 39.6 percent or higher, real growth averaged 3.8 percent. The pattern is the same regardless of threshold. Take 50 percent, for example. Growth in years when the tax rate was less than 50 percent averaged 2.7 percent. In years with tax rates at or more than 50 percent, growth was 3.7 percent.



- more -

http://thinkprogress.org/economy/2011/06/20/249061/chart-taxes-economic-growth/


The frauds pushing the deficit hysteria are those responsible for creating the crisis.

Analysis: Paul Ryan Voted to Add $6.8 Trillion to the Federal Debt

http://thinkprogress.org/economy/2012/08/17/708191/analysis-paul-ryan-votes-deficit/



Progressive dog

(6,899 posts)
21. No it is not striking unless 20% is a magic number
Sun Sep 9, 2012, 10:28 AM
Sep 2012

that somehow applies to the USA, but not other countries.

dawg

(10,622 posts)
18. Let me explain.
Sun Sep 9, 2012, 10:22 AM
Sep 2012

First off, as nearly every other wealthy country demonstrates, it is a simple matter to collect more than 20% of GDP in taxes. All that is required is the political will to do so. The Scandinavian nations are approaching 50%, and they have weathered the Euro crisis much better than the relatively lower-taxing Southern periphery.

http://en.wikipedia.org/wiki/List_of_countries_by_tax_revenue_as_percentage_of_GDP

In the forties, fifties, and early sixties, when our marginal rates were very high, our tax base was also very narrow. There were many deductions and loopholes which conspired to keep the real rate of taxation lower. This was not substantially changed until the 1986 tax act which broadened the tax base substantially but also lowered the top rate to 28%.

Before LBJ, Medicare, Medicaid and the war on poverty essentially did not exist. We did not need to collect such a large percentage of GDP, but we could easily have done so.

 

dkf

(37,305 posts)
26. Funny the piece discusses Sweden...
Sun Sep 9, 2012, 11:21 AM
Sep 2012

"Higher taxes have succeeded in increasing government revenue in small, homogeneous countries such as Sweden and Finland."

Small and homogenous...that's not us.

dawg

(10,622 posts)
29. You are being intentionally misleading.
Sun Sep 9, 2012, 01:25 PM
Sep 2012

Germany, France, UK, Canada, Italy, Brazil and Australia are also well above US levels at that link. Large, diverse economies all.

 

PowerToThePeople

(9,610 posts)
20. Shows how well Clinton did
Sun Sep 9, 2012, 10:25 AM
Sep 2012

And Obama is moving the lines the same direction, though the initial separation is much greater than Clinton had going into office.

 

dkf

(37,305 posts)
27. A lot more people were paying more in taxes and
Sun Sep 9, 2012, 11:32 AM
Sep 2012

Clinton grew the economy very well and he cut spending. He got it all right.

DippyDem

(659 posts)
24. Let me see if I have this right...
Sun Sep 9, 2012, 10:46 AM
Sep 2012

Ok so according to the graph, tax collections has been fairly steady at 20%. Today the rich are paying less tax than ever in that graph history. Which means that the middle class and below are paying more taxes than ever percentage wise...does that show that our economy is so slow because we are the engine of growth. Back in the 50's the wealthy paid up to 90% while we paid less percentage wise...thus speeding up the economy. I take this from the graphs provided by Pro Sense in post #19. That is the gist I get and that trickle down economics is bullshit. Do I have this right?

tkmorris

(11,138 posts)
28. You have it exactly right
Sun Sep 9, 2012, 01:15 PM
Sep 2012

There is one way to strengthen the economy here in the States, and one way only. Put more money in the hands of those who will spend it. That means the middle class, and below. That means increasing wages is good, that means that a strong safety net is good, and it also means that putting more money into the hands of those who will simply stash it in the Caymans or wherever is the worst thing we could do.

hfojvt

(37,573 posts)
30. Wotta load of crap
Sun Sep 9, 2012, 01:35 PM
Sep 2012

plus, I love (or not) the way they combine FICA taxes and income taxes into "federal revenue". As if taking 2% of GDP from the richest 1% in the form of income taxes is the same as taking 2% of GDP from working people in the form of FICA taxes.

And $2 trillion + in tax cuts for the top 1% (it was $2 trillion from 1986 to 2006, may be close to $3 trillion by now) adds $3 trillion to the national debt and over those decades probably adds another 1/2 trillion in interest costs. Making the Federal expenditure side higher than it needed to be.

 

Egalitarian Thug

(12,448 posts)
32. More conservacrap from the "loyal opposition".
Sun Sep 9, 2012, 02:08 PM
Sep 2012

No matter how many times this is exposed, no matter how often the sources of their 'facts' are shown to be worthless, they just keep coming back with these 30 year old fantasies of the mythical free market solutions.

Guy Whitey Corngood

(26,500 posts)
35. "The 1933 founded libertarian institute located in Great Barrington, Massachusetts, conducts
Sun Sep 9, 2012, 02:41 PM
Sep 2012

economic research in order to educate individuals."

https://www.google.com/search?q=aier&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US fficial&client=firefox-a

Simple Google search. Fuck off with this bullshit.

NashvilleLefty

(811 posts)
37. What's missing here is a graph of GDP over the same period.
Sun Sep 9, 2012, 06:17 PM
Sep 2012

Since this chart is merely showing receipts as a percentage of GDP, if GDP goes up then the percentage of Receipts to GDP would be smaller. Therefore, it could be argued that as Taxes go up, so does GDP.

Which is a good thing!

So, where is the GDP Actuals chart for the same period?

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