Why It’s Not The “Super-Rich” That Will Pay For The Left’s “Radical” Tax Plans

Friday, February 1, 2019
By Paul Martin

Via DataTrekResearch.com,
Fri, 02/01/2019

US individual income tax rates have become an important topic of debate in American politics, with both members of the new Democrat-controlled House and presidential hopefuls pitching changes to the status quo. There is, for example, talk of a 70% marginal tax rate for income above $10 million. One recent survey even showed the majority of Americans favor that idea, so there seems to be plenty of political air cover for a rethink of Federal income taxes.

Since this is the Data section, let’s look at 2 sets of numbers that should inform US tax policy.

Point #1: The history of Federal tax receipts as a percent of US GDP. This measures how various US individual/corporate tax regimes have altered the ability of the Federal government to increase revenue relative to the size of the US economy. A few points here:

Even though the highest marginal individual/corporate tax rates have varied widely since World War II (from 50% – 90% in the 1940s/1950s to 21% – 37% now), total tax receipts as a percent of GDP have been remarkably stable.

The average tax receipt/GDP ratio from 1968 to 2017 is 17.1%. Every dollar of GDP creates 17 cents of Federal individual/corporate taxes.

This ratio was 17.0% in 2017 (latest data available). The current cycle peak was 17.8% in 2015.

History shows that economic growth does far more to increase tax collection than changes in the tax code. The post-World War II high for tax collections/GDP was in 2000, at 19.8%. The low water mark was 14.4% in 2010.

You can see the data in chart form here: https://fred.stlouisfed.org/series/FYFRGDA188S

The Rest…HERE

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