This set of facts from the Murphmeister is just too good not to have another go at.
Key USTax Facts
- 15,753: The number of households in 1961 with $1 million in taxable income (adjusted for inflation).
- 361,000: The number of households in 2011 estimated to have $1 million in taxable income.
- 43.1: Percent of total reported income that Americans earning $1 million paid in taxes in 1961 (adjusted for 2011 dollars)
- 23.1: Percent of total reported income that Americans earning $1 million are likely to pay in taxes in 2011, estimated from latest IRS data.
- 47.4: Percent of profits corporations paid in taxes in 1961.
- 11.1: Percent of profits corporations paid in taxes in 2011.
OK, so let\’s have a little walk through some tax statistics.
However, total tax revenues in 2010 were in fact $4,201 billion. And if taxes had remained flat as a percentage of GDP the 1961 number would be $4,280 in 2010. That\’s close enough to being the same when we\’re talking about government money.
So what is the contention of the Laffer Curve? That at some levels of taxation, reducing the rate of tax will lead to sufficient economic growth to increase the amount of revenue collected.
And we expect this to have a greater long term effect than a short term one.
OK. So what do we have before us? We (err, they) are collecting the same percentage of overall economic activity as tax revenues. They have massively lowered rates, both average and marginal. There has been huge economic growth and the actual tax revenues are several times higher than they would have been without that growth.
Now no, I do not say that proves that the Laffer Curve is true at all tax rates for everyone all the time….in the sense that all tax cuts pay for themselves. However, the facts that Ritchie has presented to us are at least consistent with having moved from, in 1961, the wrong side of the Laffer Curve. Rates cut, economic growth up, revenues rise.
And I think we should thank Ritchie for bringing this to our attention. It\’s interesting, isn\’t it?
Which leads to an even more interesting question. Are we still on the wrong side of the Laffer Curve? My feeling in my water is that, in the long term, yes we are.