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Comment by chrisco255 | Hacker News Reader

https://en.wikipedia.org/wiki/Hauser%27s_law

Hauser's law is the proposition that, in the United States, federal tax revenues since World War II have always been approximately equal to 19.5% of GDP, regardless of wide fluctuations in the marginal tax rate.[1] Historically, since the end of World War II, federal tax receipts as a percentage of gross domestic product averaged 17.9%, with a range from 14.4% to 20.9% between 1946 - 2007.[2]

So...yeah, marginal rates have been 70% or higher...but the Federal government has never successfully collected that much, due to write-offs, tax shelters, and other schemes that were largely closed in 1986 with...

https://en.wikipedia.org/wiki/Tax_Reform_Act_of_1986

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20% is a third higher than 15% - that’s a pretty wide margin that actual taxes can swing. 70% marginal rate on a new higher top margin of only one kind of tax (income) obviously would not increase overall tax revenue by a tremendous amount. But even if it ends up having a minimal overall effect, it could still represent a significant shift in the distribution of taxes.

Honest question: if people like the one described in the article won't actually end up paying more in taxes due to an increase in their tax rate, why do they oppose it?

The answer is likely quite simple.

Because allowing for one idea would lead into another.

70% tax is a start. Not the end. The idea is to find where the "excess" income is taking place and add additional taxes in that area to direct the income into investment and services.

70% may be a start at ordinary income. But does it apply to investments? And then what's next?

I think the key question for Dell and others is: can you show proof that the current approach of lower taxes boost the average individual income of workers? Because right now we're seeing great numbers from Wall Street, but wages are still virtually flat year over year. How does the Dow continue to climb but workers' pay stay the same?

Wage growth is not flat:

https://www.bls.gov/news.release/pdf/realer.pdf https://www.cnbc.com/2018/10/31/wages-and-salaries-jump-by-3... https://www.bbc.com/news/business-45448323

Adjusted for inflation, pretty flat:

https://fred.stlouisfed.org/graph/?g=l7U1

Way to end the graph in July 2018...extend the graph out to the edge and you see the wages start to rise again. And as long as unemployment stays low, we should expect wages to continue to rise.

because this Hausers law shows that the U.S. government doesn't have a revenue problem, it's collecting proportionately the same amount of money as it has been. there' a spending problem: we keep finding more and more ways to spend money.

this whole green new deal proposal is "lets go spend billions more dollars on XYZ" a lot of the mental pushback is what are you going to stop spending on today to pay for it? the answer: "nothing, we're just going to raise taxes"

i believe opposition to this is less about can the 1% afford the taxes or not, and more for principled spending

What's wrong with investing taxes in growing the GDP?

Why does the funding of current projects affect you level of support for different projects? That's sunk cost fallacy.

Where's the proof that this would increase the GDP?

Plus, this idea that 70% off the top 1% is still nowhere near enough to pay for any of this. The numbers I've read suggest that taxing 70% of the $10mil+ earners would amount to around $80bil in revenue, assuming no changes to those earners' incomes as a result of the increased taxes... That's nearly nothing compared to this GND proposal.

Because it leads to bad economic choices by the rich and that doesn't actually help anyone. Just recently we had a discussion on how those in Hollywood avoided the high marginal rates:https://www.bloomberg.com/opinion/articles/2019-01-29/hollyw...

With high marginal rates, the tax shelters the Hollywood rich invested in were less productive investments. Yes high marginal rates will lead to more CPA hours to get around the high taxes, but that is just an example of the Broken Window fallacy. When there is no way around them, very high rates will lead to dead weight losses to the economy as economic activity won't be done.

The article touches on a cultural shift in business leader salaries, saying that they didn’t demand as much because it would all go to taxes. Not sure how accurate that is, but if it were the case would that explain some of this phenomenon? Basically income would be shifted to lower brackets.

So what if tax revenue has been flat as a percent of GDP? That says nothing as to how the burden of that tax is allocated.

>So what if tax revenue has been flat as a percent of GDP?

Like with much data, it has to put in context with other data, but I am pretty sure most people don't know that fact.

As how that tax burden is allocated, do you think the rich paid more of a share of the taxes back when there were high rates?

In 1980 the highest federal marginal rate was 70%. The top 10% paid 49% of federal income taxes in 1980 and the bottom 50% paid 7% of federal income taxes. In 2015, the top 10% paid paid 70% of federal incomes taxes and the bottom 50% paid 3% of federal income taxes. (http://www.ntu.org/foundation/page/who-pays-income-taxes)

So if we re-implement the 70% marginal tax rate now that these schemes are closed...?

Technically no, because the 70% marginal tax rate would be on earned income while a significant portion of wealth is taxed through capital gains.

The tax code is very large, so you can implement a 70% marginal rate on earned income and capital gains, but that will just shift accounting elsewhere.

Alternatively, we could get better at our costs. Actually look to balance the budget by decreasing military spending, rein in pharma companies and healthcare costs, and then if needed raise taxes to make up the difference.

It would have a much better effect, because increasing the taxes on the wealthy would do nothing to adjust healthcare spending, high cost of drugs, a lack of investment in our infrastructure.

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