Monday, March 26, 2012

Hauser's Law: The Tax Collectors Enemy

In the current economic crisis, one of the topics that is central to the politicos is the Federal Government Debt. Many are seeking to raise taxes, citing this is a potential solution. While others are seeking to lower taxes as a solution as well. Regardless of which direction is chosen, Hauser's Law must be considered.

What is Hauser's Law? W.Kurt Hauser, an investment economist, has reviewed economic data over the last 60 years, and it has shown that regardless of how the marginal income tax rates have been structured, the total income tax collected has been approximately 19% of GDP.  The top Marginal Income tax rates have been as high as 92%, and has low 28%. In both extremes, the rule of 19% of GDP has not been violated.

Why is this the case? Many possible things could lead to this answer, but ultimately it is about the elasticity of behavior towards taxes.

Here are some links regarding Hauser's Law:

"There is no Escaping Hauser's Law"

"Will Hauser Law Protect Us from Revenue Hungry Politicians? "

"Hauser's Law"

The question is really this: Do we want the Government to tax us at higher income tax rates, but receive a smaller piece of the economic pie, or do we prefer the Government to tax us at a lower rate and receive more revenue from a larger economic pie?  In either case, the Government will still receive 19% of the GDP.

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