Hauser's Law – Top Income Tax Rate Should Be No Higher Than 19%
Mostly summarized from article “There’s No Escaping Hauser's Law,” Kurt Hauser, Nov. 26, 2010:
Raising federal income tax rates does not increase tax revenues. Rather it decreases both tax revenues and GDP.
Per Figure 1, since the 1940s the top marginal individual income tax rate has been as high as 92% and as low as 28%.
Income tax revenues as a share of GDP have averaged no more than 19%, whether income tax rates are high or low.
…
When income tax rates are high, people are motivated to shift, hide, and underreport income and assets.
They also divert time and effort from making pro-growth productive investments to seeking tax shelters.
Tax shelters include offshore tax havens and tax-exempt investments.
This behavior reduces economic growth and job creation.
…
So, the conclusion is it’s better to have lower income tax rates.
Then more money invested rather than sheltered.
Lower tax rates, ideally no more than 19%, result in
· more business investment
· a larger economy with more and better jobs
· more tax revenues, because 19% tax revenues of a low tax rate big economy is more than 19% tax revenues of a high tax rate small economy
… …

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