Analysis of the Day

Last month in this space, I reprinted a Marketplace of Ideas column from my first term as editor (Editor 1.0?), "The way things should be." That column reprinted a 1993 quote from an economist, W. Kurt Hauser, who noted that since World War II, regardless of what income tax rates were, tax collections totaled about 19.5 percent of Gross Domestic Product.

David Ranson in the Wall Street Journal reintroduces what he calls Hauser's Law, with this punch line:

What happens if we instead raise tax rates? Economists of all persuasions accept that a tax rate hike will reduce GDP, in which case Hauser's Law says it will also lower tax revenue. That's a highly inconvenient truth for redistributive tax policy, and it flies in the face of deeply felt beliefs about social justice. It would surely be unpopular today with those presidential candidates who plan to raise tax rates on the rich — if they knew about it. ...

Because Mr. Hauser's horizontal straight line is a simple fact, it is ultimately far more compelling. It also presents a major opportunity. It seems likely that the tax system could maintain a 19.5% yield with a top bracket even lower than 35%.

Someone sign up Barack Obama for a Wall Street Journal subscription. (Or, better yet, sign him up for Marketplace; then he can see what life in the Bitterness Belt is really like.)