November 29, 2010

Reality Isn't Negotiable: The Government Can't Raise More than 19% in Taxes for Long

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This chart by Mercatus Center Senior Research Fellow Veronique de Rugy shows the historical path of federal taxation as a percentage of GDP using the earliest records available from the Office of Management and Budget and top marginal tax rate data from the Tax Policy Center. From 1930 to 2010, tax revenue collection in the United States has never topped 20.9%, averaging 16.5% of GDP over these 80 years. This comes despite the drastic historical fluctuation in the rate of taxes on the wealthiest Americans. As we move toward debt reduction, it is critical to keep the long-term path of the United States in mind.
In recent years, spending, not revenues, has deviated from its historical path; spending must be addressed to rectify the budget.

Veronique de Rugy explains why we can’t tax our way out of the debt on Bloomberg TV.