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In the 20s-40s (pre-ww2), tax revenue was ~2% of GDP. It is currently >20% of GDP

It's a spending problem. You're anchoring on a talking point with out actually running numbers.

Don't believe me, run the numbers yourself.





I think your 2% number is extremely misleading.

From what I can see, taxation as GDP percentage was never really under 10% since 1950, while big cuts to the top tax rate happened in the 60s and 80s (and the federal budget was continuously in the red since mid 70s basically, with one brief exception before 2000).


OP was specifically talking about the 20s, 30s, 40s but just to add a complete picture.

Just to add some empiricism to the conversation

Fiscal Year Tariffs/Customs Individual Income Corporate Income Top Marginal Rate Receipts (% GDP)

-----------------------------------------------------------------------------------------------------------

1928 14.0% (approx) DNF DNF 25.0% DNF

1935 8.4% 14.6% 14.7% 63.0% 5.1%

1940 6.1% 13.6% 18.3% 81.1% 6.7%

1944 0.9% 45.0% 33.9% 94.0% 20.5%

1952 1.2% (approx) 42.2% 32.1% 92.0% 19.0%

1960 1.3% (approx) 42.0% 23.0% 91.0% 17.8%

1970 1.1% (approx) 46.0% 18.0% 71.8% 17.9%

1980 0.8% (approx) 47.0% 12.0% 70.0% 18.9%

1990 1.3% (approx) 45.0% 9.0% 28.0% 17.8%

2000 1.1% (approx) 49.0% 11.0% 39.6% 20.0%

2010 1.2% (approx) 41.0% 9.0% 35.0% 14.6%

2015 1.3% (approx) 47.0% 10.0% 39.6% 17.6%

2019 2.0% (approx) 50.0% 7.0% 37.0% 16.3%

-----------------------------------------------------------------------------------------------------------

DNF=Did not find

- Tariffs fell from ≈14% of receipts in 1928 to <1% by WWII -> income taxes replaced trade duties.

- Individual income taxes overtook all other sources after 1943

- Corporate shares peaked during war mobilization (~⅓ of revenue in 1944–52).

- Top marginal tax rate was surprisingly not too corrilated to government revenue.

(REALLY wish HN did basic markdown formatting)


> Top marginal tax rate was surprisingly not too correlated to government revenue

Yes. Which is interesting, but also makes sense if you assume that a frequent goal is to shift the tax allocation between wealth classes (adjustments to top rate would be somewhat compensated by other changes).

I think it is always too easy to find arguments for almost any position in data like this, because the overall picture changes dramatically over just a few decades; wealth/income percentiles become qualitatively different as GDP grows ("workers class" pre WW2 is quite different from the same income percentile now) and the data is noisy too, so if you squint you can interpret almost anything in there.

In a perfect world, we would have twenty identical Americas with fixed tax policies, and be able to compare their development over decades; what we have is instead a bunch of different nations radically changing their behavior basically every time a different government comes into power, and many conclusions are inevitably just educated guesswork.




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