David Ranson today trots out a claim the Wall Street Journal editorial page has been making for years, which is that revenues can't rise much above 20% of GDP -- higher taxes will just choke off growth, Laffer Curve-style:
The nearby chart shows how tax revenue has grown over the past eight decades along with the size of the economy. It illustrates the empirical relationship first introduced on this page 20 years ago by the Hoover Institution's W. Kurt Hauser—a close proportionality between revenue and GDP since World War II, despite big changes in marginal tax rates in both directions. "Hauser's Law," as I call this formula, reveals a kind of capacity ceiling for federal tax receipts at about 19% of GDP...
18.3% must be a realistic upper limit on the ratio of budget revenues to GDP for years to come. Any major tax increase will reduce GDP and therefore revenues too.
There are numerous problems with this thesis. One is that it doesn't consider the possibility that no government ever tried to set tax rates at such a level that they'd be expected to produce revenues much higher than 20% of GDP. Indeed, he doesn't produce even a single example of a time when tax rates were set at such a level but created some supply-side disincentive effect that caused revenue to stay below the magic level.
Second, the vast majority of advanced countries have tax revenues well above 20% of GDP. So what is it about the U.S. that makes its economy uniquely sensitive to tax rates such that it cannot collect more than this amount?