Contributor Post Created with Sketch. Pushing on a String, Visualized

 

There’s a weird and unnatural sclerosis to the way the modern liberal views the world. As though the circus of human affairs were a quiescent control group and federal policy a precise, scalpel-like scientific variable. If we can only tune things just right!

Of course it does not work that way. I spent all of Saturday morning and afternoon paying taxes, which prompted me to pull some data. Let’s chart the top marginal tax rate — the rate very successful people pay on their last slice of income — against the actual total federal income tax receipts as a percentage of the economy. 

Top Bracket Rate versus Individual Tax Receipts as a Percent of GDP

We can tax the rich 1%, 91%, or anything in between. 1% will free the economy and spark superior capital allocation and new invention. 91% will cripple our prospects for new medicine, new technology, and new ways to enjoy life. But no matter what the President does, he’s only collecting 8% of GDP on April 15. His decision is whether or not he wants that figure — the GDP — to grow. So: does he?

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  1. Mark Wilson Member
    Mark WilsonJoined in the first year of Ricochet Ricochet Charter Member

    It’s not as great a story as you portray, Joe, at a constant 8%. The difference between the the highest and lowest numbers in the chart since 1980, 9.2% and 7.2% of GDP, is $300 billion in 2012. 

    All other things being equal (one of the core assumptions of liberalism), and ignoring the differences in deductions that likely account for the major features of the graph (ignoring inconvenient facts is another specialty of liberals), over a decade that’s about $3 trillion in extra revenue that can be “invested” in votes for the Democratic party.

    • #1
    • April 17, 2013, at 2:21 AM PDT
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  2. Valiuth Member
    ValiuthJoined in the first year of Ricochet Ricochet Charter Member

    When we had a top rate of 91% our economy wasn’t crippled though. My understanding is the 50’s and 60’s were quite booming. 

    • #2
    • April 17, 2013, at 2:39 AM PDT
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  3. raycon and lindacon Inactive
    Valiuth: When we had a top rate of 91% our economy wasn’t crippled though. My understanding is the 50’s and 60’s were quite booming. · 4 minutes ago

    The ’50s and ’60s were a period when a massive influx of innovation from the WWII technology development effort brought huge productivity gains, overwhelming the top marginal taxes. Once the economy absorbed this growth, things normalized, and marginal tax rates became the water that government poured on the fire of entrepreneurship.

    • #3
    • April 17, 2013, at 2:56 AM PDT
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  4. Brasidas Member

    Fascinating, Joe. I’d like to see this chart reproduced far and wide. Of course, the administration must be aware of this too.

    I’m reminded of a debate question that was put to Obama during his first campaign for the presidency. Charles Gibson pointed out to him that lowering capital gains tax rates actually generated an increase in revenues under Clinton and GW Bush. Revealingly, he said he didn’t care; that to him, it was then a matter of fairness. Obama and his team are driven more by a desire for wealth redistribution than by economic growth or improved quality of life.

    • #4
    • April 17, 2013, at 3:01 AM PDT
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  5. Dr. Strangelove Thatcher
    Dr. StrangeloveJoined in the first year of Ricochet Ricochet Charter Member

    Hmmm…I doubt the Left cares about the revenue the govt receives. The ones I talk to tell me that the only way that anybody got rich is by doing something “unfair” and taking it away makes things fair again.

    I’m. Not. Exaggerating. I have been told this by co-workers. Also Candidate Obama said the same thing about why he wouldn’t lower capital-gain taxes.

    So, who cares that it does nothing for the govt’s revenue? Not the Left.

    • #5
    • April 17, 2013, at 3:07 AM PDT
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  6. Amy Schley, Longcat Shrinker Moderator
    raycon and lindacon
    Valiuth: When we had a top rate of 91% our economy wasn’t crippled though. My understanding is the 50’s and 60’s were quite booming. · 4 minutes ago

    The ’50s and ’60s were a period when a massive influx of innovation from the WWII technology development effort brought huge productivity gains, overwhelming the top marginal taxes. Once the economy absorbed this growth, things normalized, and marginal tax rates became the water that government poured on the fire of entrepreneurship. · 12 minutes ago

    Not to mention that American companies could afford to be inefficient given that all other major industrial areas on the planet had been bombed back a century or so.

    • #6
    • April 17, 2013, at 3:09 AM PDT
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  7. Valiuth Member
    ValiuthJoined in the first year of Ricochet Ricochet Charter Member

    In the end though do we have any rational way of picking an optimum tax rate? That is what seems to be the problem. Politicians are really just picking numbers out of their hats. Republicans like small numbers and democrats like bigger ones. Clinton and Bush I raise taxes things go fine. Kennedy and Reagan cut taxes and things go fine. Bush II cuts taxes and not much really happened….

    • #7
    • April 17, 2013, at 3:53 AM PDT
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  8. Profile Photo Member

    The really irritating thing is the compliance costs in time and money. If everyone had to fill out every form (which would seem to be equality under the law to me) we would see tax reform become a priority.

    • #8
    • April 17, 2013, at 5:04 AM PDT
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  9. raycon and lindacon Inactive
    Valiuth: In the end though do we have any rational way of picking an optimum tax rate? That is what seems to be the problem. Politicians are really just picking numbers out of their hats. Republicans like small numbers and democrats like bigger ones. Clinton and Bush I raise taxes things go fine. Kennedy and Reagan cut taxes and things go fine. Bush II cuts taxes and not much really happened…. · 3 hours ago

    The optimum tax rate is the money required for the Federal government to meet it’s Constitutional mandates. Of course, it has been a century since that kind of thinking has been practiced by politicians.

    • #9
    • April 17, 2013, at 7:52 AM PDT
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  10. Peter Robinson Founder

    Beautiful.

    • #10
    • April 17, 2013, at 9:38 AM PDT
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  11. Valiuth Member
    ValiuthJoined in the first year of Ricochet Ricochet Charter Member
    raycon and lindacon
    Valiuth: In the end though do we have any rational way of picking an optimum tax rate? That is what seems to be the problem. Politicians are really just picking numbers out of their hats. Republicans like small numbers and democrats like bigger ones. Clinton and Bush I raise taxes things go fine. Kennedy and Reagan cut taxes and things go fine. Bush II cuts taxes and not much really happened…. · 3 hours ago

    The optimum tax rate is the money required for the Federal government to meet it’s Constitutional mandates. Of course, it has been a century since that kind of thinking has been practiced by politicians. · 2 hours ago

    Yes, alas our breathing parchment seems to have inflated those mandates to their present levels. I haven’t heard of any plans to smother it. So we are stuck with quite a bill to pay.

    • #11
    • April 17, 2013, at 10:32 AM PDT
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