Do Higher Taxes = Higher Tax Revenues?

Tax collections have remained steady at about 18-20% of GDP since 1950. The government could certainly raise the top marginal rate back to the 70% rate of the 1970's, but they won't be likely to collect any more revenue. The proportional relationship between tax revenue and GDP has persisted with top marginal rates as high as 91% and as low as 29%. According to the data, the only way to increase tax revenue is to increase GDP. For a more detailed account of "Hauser's Law," follow this link:

http://www.theneweditor.com/index.php?/archives/8036-You-Cant-Soak-the-Rich.html

People off all stripes practice tax avoidance (both legal and illegal) as taxes get higher. And it's not just the domain of the uber-rich hiring tax lawyers to find obscure and complicated loopholes. If you are a cigarette smoker in New York, you know that the $3 per pack tax has made it more profitable for thieves to hijack a cigarette truck than an armored car. The black market is thriving as are cigarette sales in neighboring states. Why? Because nobody, rich or poor, wants to pay a tax rate that's confiscatory. It removes the incentive to work, produce and invest.