Hauser's law is one of the stranger phenomenons in economic data. It was originally proposed by Kurt Hauser, who observed back in 1993 that:
No matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5% of GDP.
We decided to put Hauser's Law to the test to see if it holds up. To do that, we turned to the National Taxpayers Union, which maintains a table showing the level of the topmost marginal income tax rates for individuals from 1913 through the present. Looking just at the postwar period, we find that the marginal tax rate that applies for the U.S.' uppermost income tax bracket has ranged from a high of 92% in 1953 and 1954 to a low of 28% from 1988 through 1990. The current top rate is 35%, which is scheduled to increase after 2010 to 39.6% when the tax cuts of the 2003 Jobs and Growth Tax Relief Reconciliation Act expire.
We next turned to the Table 1.2 Summary of Receipts, Outlays, and Surpluses or Deficits as Percentages of GDP: 1930-2014, which is produced by the White House's Office of Management and Budget, since this Excel spreadsheet contains both the amount of total federal government tax revenues (aka "receipts") and the value of GDP for each of our years of interest, including forecasts for these values from 2009 through 2014.
Political Calculations is a site that develops, applies and presents both established and cutting edge theory to the topics of investing, business and economics.
Be the first to read Political Calculation's column. Sign up today and receive Townhall.com delivered each morning to your inbox.