Posted by
Vonnie on Monday, May 26, 2008 8:55:00 PM
Scientific laws add certainty to our lives. From this, we can make reasonable plans.
The Hauser Law says the tax collected is tied to 19.5% of GDP. It was discovered 15 years ago and has been verified for every year since the end of WWII.
This law says no change in tax rate can change the tax collected, at least for the short term. Eventually, GDP either deteriorates or grows, depending on the care and feeding from our taxpayers.
Our record-high 2007 tax collected is 2.6 trillion, which is 19.5% of our 13.2 trillion GDP. The tax formula is 35% tax rate to our 7.4 trillion earned income.
What if we increase the tax rates from 35% to 60%? The GDP is not changed, so the tax collected remains 2.6 trillion for the short term. Because entrepreneurs have higher taxes and tighter budgets, they have less of an incentive to invest. Decrease in investment means less jobs and less earned income. In this short term case, earned income is reduced from 7.4 to 4.3 trillion. This tax formula is 60% of 4.3 trillion for the same 2.6 trillion tax collected.
What if we decrease the tax rates from 35% to 15%? GDP and tax collected remains the same for the short term. But for this short term, the earned income has jumped from 4.3 to 17.3 trillion. This tax formula is 15% of 17.3 trillion for the same 2.6 trillion tax collected.
Taxpaying entrepreneurs have less to invest into our GDP when the tax rate increases and more to invest when the tax rate decreases.
Eventually on the tax rate increase, the GDP will deteriorate because less investments are available. So say eventually, the GDP shrinks from 13.2 to 10 trillion. This means the tax collected is reduced from 2.6 to 2.0 trillion. And, taxpayer earned income has collapsed from 7.4 to 3.3 trillion. Deterioration continues because the cause and result is cyclical.
Eventually on the tax rate decrease, more investment means more GDP growth. So say eventually, the GDP grows from 13.2 to 16 trillion. Earned income explodes from 4.3 trillion to 22.7 trillion. For 19.5% of 16 trillion GDP and 15% of 22.7 trillion earned income, the tax collected increases from 2.6 to 3.1 trillion. Then, the cyclical cause and affect continues to ascend.
Furthermore, the rich entrepreneurs need a work force to accomplish the GDP building. This means we all share in the increased prosperity.
If the government works to encourage a bigger pie of GDP, then they would collect a bigger piece of pie, rather taking a higher percentage of the shrinking pie.
Last week, I heard once in the house and once in the senate, two Democrats each say that President Bush at the beginning of his administration met with VP Cheney to scheme to help the oil companies. I believe it is more likely they discussed how to apply this Hauser Law for all oil companies, all industries, and all of our country.
It is unfortunate that opinion, appearing as fact, is brought to debate to our legislative branch. The Democrats debated to fund the Iraq War Supplemental Funding bill by increasing the tax rate of taxpayers making over one million. They were warned that this would affect 82% of our small business. This was ignored.
Our laws are ignored and opinions build our plans.