Progressives are furious at President Obama for not pushing harder for tax hikes on “the rich” — that’s progressive -speak for taking more from the producers who create jobs and provide the capital investment that leads to economic growth. As Duke professor Mike Munger explained recently, the producers are now engaged in a capital strike — I say understandably so . Progressives will never acknowledge the value of “the rich” they demonize or why Munger’s point is critical to making future policy. Instead, progressives are busy flooding the media and online world with 2012 re-election talking points designed to appeal to the very worst in us: envy. Today, JLF President John Hood puts some facts to the discussion about tax rates and their impact on federal revenues and economic growth. It’s another keeper from Hood. I encourage you to read the whole thing.
Since the end of World War II, the United States government has collected an average of around 18 percent of the gross domestic product in federal revenue. During this period, changes in tax rates have affected revenues far less than changes in economic growth.
In the 1950s, when the top income tax rate was 90 percent, federal revenues averaged about 17.5 percent of GDP. In the 1960s, during which the top rate fell to 70 percent, federal revenues averaged about 17.9 percent of GDP. In the 1980s, when the top rate fell first to 50 percent and then below 30 percent, federal revenues averaged about 18.2 percent of GDP.
More recently, the 1990s began with two major tax hikes – signed by President George Bush in 1990 and Bill Clinton in 1993. The top marginal tax rate climbed to just shy of 40 percent. During the first half of that decade, federal revenues averaged about 17.8 percent of GDP. Then President Clinton and a Republican Congress cut federal tax rates, including those on capital gains and imports. Federal revenues during the second half of the 1990s averaged 19.7 percent, largely explained by higher capital gains from the stock market surge.
Once you’ve read Hood’s piece, I encourage you to listen to Munger’s interview. And then read comments made recently by self-described Democrat Steve Wynn, the casino mogul and entrepreneur, about the negative impact on business of our current federal policies. You’ll get a good sense of what’s ailing our economy and the direction our policies should take.
