Since World War II, despite 30 major changes in the tax code, federal revenue as a percentage of GDP has hardly ever budged from just under 19 percent -- that's all the government can raise, period:
Why? Higher taxes discourage the "animal spirits" of entrepreneurship. When tax rates are raised, taxpayers are encouraged to shift, hide and underreport income. Taxpayers divert their effort from pro-growth productive investments to seeking tax shelters, tax havens and tax exempt investments. This behavior tends to dampen economic growth and job creation. Lower taxes increase the incentives to work, produce, save and invest, thereby encouraging capital formation and jobs. Taxpayers have less incentive to shelter and shift income.
That means that the president's Providing Cover for the Gutless Cowards Commission National Commission on Fiscal Responsibility and Reform, in suggesting we eventually get spending down to 21 percent of GDP, is actually committed to deficit spending and big governdment forever. Debating the specifics of each commission proposal on
