Of the 149 million households filing federal income taxes for 2006, some 3% reported income between $200,000 and $500,000; fewer than 1% claimed income above half a million dollars.
Many people believe that increasing the marginal rate will collect more revenue from the the rich or for the government in general. Historically it does not matter if the top marginal rate is 90% or 25% the government collects 19.5% of GDP. The only way to get more tax revenue is to increase GDP. Such as a concerted effort to accelerate a manufacturing and construction revolution using new systems and technology.
Economists of all persuasions accept that a tax rate hike will reduce GDP, in which case Hauser’s Law says it will also lower tax revenue. That’s a highly inconvenient truth for redistributive tax policy, and it flies in the face of deeply felt beliefs about social justice. It would surely be unpopular today with those presidential candidates who plan to raise tax rates on the rich – if they knew about it.
Although Hauser’s Law sounds like a restatement of the Laffer Curve (and Mr. Hauser did cite Arthur Laffer in his original article), it has independent validity. Because Mr. Laffer’s curve is a theoretical insight, theoreticians find it easy to quibble with. Test cases, where the economy responds to a tax change, always lend themselves to many alternative explanations. Conventional economists, despite immense publicity, have yet to swallow the Laffer Curve. When it is mentioned at all by critics, it is often as an object of scorn.
Because Mr. Hauser’s horizontal straight line is a simple fact, it is ultimately far more compelling. It also presents a major opportunity. It seems likely that the tax system could maintain a 19.5% yield with a top bracket even lower than 35%.
The fact that no matter what the rates and brackets all that can be obtained is 19.5% that argues for as simple a tax code as possible for getting that 19.5%.
The fair tax
or a
Relatively flat tax
The wealthier someone is then the more control they can have over their financial profile. Money can be shifted between income, corporate profits, dividends and capital gains and new income can be shifted between jurisdictions.
FURTHER READING
Tax brackets 1971-1978
1975 Median income 11,800 Mean income 13,779
Someone making 5 times the median income. Would be in the 60k-70k range.
(equal to someone now making 200,000).
Tax rate would be 53-55%.
1965 Median income was $6900 Five times that was 35,000 for 50-53% tax rate.
CBO analysis of long term taxes
Comparing some tax burdens between countries
Comparing top marginal individual and corporate tax rates
Historical lessons of lower tax rates
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
Known for identifying cutting edge technologies, he is currently a Co-Founder of a startup and fundraiser for high potential early-stage companies. He is the Head of Research for Allocations for deep technology investments and an Angel Investor at Space Angels.
A frequent speaker at corporations, he has been a TEDx speaker, a Singularity University speaker and guest at numerous interviews for radio and podcasts. He is open to public speaking and advising engagements.