Question:

What do you think of Hauser's Law concerning taxes, revenue, & the GDP?

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"No matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5% of GDP."

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  1. I think it is an observation about one facet of the results of tax policy and has no obvious consequences for policy.

    If, in fact, you believe Hauser's Law, then increasing the top tax rate should do no harm (up to the point where it starts decreasing GDP), but all who embrace it use it as an argument for decreasing tax rates (does anyone really believe that if the tax rate were 0, the government would still be collecting 19.5% of GDP in revenue?)

    After all, one of the reasons for the higher tax rates was not to raise more money but to raise the money more "fairly" - more from the richer and less from the poorer.

    All in all, it looks just as simplistic as the Laffer curve and just as suspect. Just as the Laffer curve was an observation that was justified ex post factor by a theory but didn't meet the test of time, all I see is an observation that raises interesting questions, but does not provide any answers.

    But it would be really interesting to find out what was really going on behind the numbers.

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