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U.S. federal government tax receipts as a percentage of GDP from 1945 to 2015 (note that 2010 to 2015 data are estimated) Hauser's law is the empirical observation that, in the United States, federal tax revenues since World War II have always been approximately equal to 19.5% of GDP, regardless of wide fluctuations in the marginal tax rate. [1]
Moreover, the sale does not occur, so the government never collects the revenue that was the whole reason for the distortion. This is the deadweight loss—the government has not merely taken a cut of the benefits from the exchange, it has destroyed those benefits for all three. [7] These are the results optimal tax theorists seek to avoid.
If the tax rates are too high, discouraging labor and investment, a reduction in tax rates may in fact lead to an increase in government tax revenues, because it will encourage the entities to work and invest. [8] As the picture shows, the Laffer curve tells us that the government's tax revenue is zero for tax rates 0% and 100%.
The ideal tax rate is zero, and a few investments provide tax-free income. The most common are municipal bonds issued by state and local governments, which produce interest that's free of tax.
A Lindahl tax is a form of taxation conceived by Erik Lindahl in which individuals pay for public goods according to their marginal benefits. In other words, they pay according to the amount of satisfaction or utility they derive from the consumption of an additional unit of the public good.
The modern literature on optimal labour income taxation largely follows from James Mirrlees' "Exploration in the Theory of Optimum Income Taxation". [1] The approach is based on asymmetric information, as the government is assumed to be unable to observe the number of hours people work or how productive they are, but can observe individuals' incomes.
Everyone's favorite time of year is right around the corner: Tax Day! Filing and paying taxes is a part of life for everyone who works in the U.S. Making sure you file your tax return correctly is...
While a tax refund is certainly better than a tax bill, there are some good reasons why you should reconsider hoping for a refund. Find Out: 6 Reasons Your Tax Refund Will Be Higher in 2025