I'm a little late coming to this, but I see that Michael Goldfarb is repeating some thoroughly debunked right-wing economic propaganda over at the McCain campaign blog. Goldfarb writes that:
The fact that Americans can't afford the massive tax increases Barack Obama is proposing shouldn't obscure another truth: those increases are likely to do nothing at all to increase federal revenues. There was a fascinating piece in the Wall Street Journal a few weeks ago that showed federal revenues holding steady at about 19.5% of GDP for the last 50 years. This number hasn't budged "no matter what the tax rates have been." So not only are higher taxes going to hurt the economy, but the evidence shows they will also reduce overall federal revenue (19.5% of what will be a smaller GDP). Read the Journal piece here.
Unfortunately, the Journal piece Goldfarb links to is pretty dubious. For one thing, as Portfolio's Zubin Jelveh has pointed out, the Journal article suggests that overall tax revenue (that is, revenue from corporate taxes, income taxes, payroll taxes, etc.) stays the same (as a percentage of GDP) in response to changes in the income tax. But if you want to find out whether you can "soak the rich," as the piece's headline teases, you have to look at whether income tax revenue stays the same. And income tax revenue actually fluctuates quite a bit.
According to this CBO chart, for example, income tax revenue fell from 10.3 percent of GDP in 2000 to 7.0 percent in 2004 (scroll about a third of the way down the page). Three guesses as to what caused the drop.
One problem with looking at overall tax revenue, as Jelveh points out, is that some types of revenue could be climbing while others are falling, which is part of what's happened over the last 50 years. Even so, that 19.5 percent figure masks a lot of fluctuation in overall revenue, too. The same CBO chart puts it at 20.9 percent of GDP in 2000 but only 16.3 percent in 2004.
So, with all due respect to Goldfarb and the Journal, it looks like you can in fact "soak the rich."
Anyway, don't take my word for it. Ask such liberal partisans as George W. Bush's Council of Economic Advisers. Back in the 2003 Economic Report of the President, the Council noted that while "the economy grows in response to tax reductions... it is unlikely to grow so much that lost tax revenue is completely recovered by the higher level of economic activity." Which, among other things, means that tax cuts lower revenue as a percentage of GDP.*
Maybe this is just another example of McCain putting daylight between himself and the Bush administration.
P.S. See Brendan Nyhan for all the times Bush's own economic advisers have conceded that tax cuts lead to lost revenue.
*The Journal piece implicitly assumes that revenue lost from a tax cut is not only completely recovered thanks to higher economic growth, but that it's more than recovered--you actually end up with more revenue than you would have.