It's an awfully big coincidence that your graph happens to stop right before the whole reaganomics house of cards came so obviously and devastatingly crashing down eh?
no, the graph stops in 2005 because that's when it stops. however, if we are looking at revenue as a % of GDP, and what causes it to move up and down, then the answer is actually rather simple. It is the relative size of government. Government, you see, does not tax itself quite like it taxes production, labor, and investment - so, as government expands as a share of GDP, revenue is being drawn from a smaller slice of the pie, and so it
shrinks as a share of GDP. Observe:
1963: Spending drops slightly, revenue increases slightly
1967: Spending increases, revenue drops
1968: Spending drops, revenue increases
1970: Spending increases, revenue drops
1973: Spending drops, revenue increase
1974: Spending increases, revenue drops
1976: Spending drops, revenue increases
1979-80: Spending increases, Revenue drops
1983: Spending begins to decrease, Revenue begins to increase
2000: Spending begins to increase again, Revenue begins to decrease again
2004: Spending slightly decreases, revenue increases
2008: Spending explodes, revenues plummet
Obviously tax rates are a huge determinate of revenue
yes and no - they are an
indirect determinate of revenue. mostly inasmuch as they alter GDP by altering the amount of time people spend doing productive things v spending trying to minimize their tax exposure.
When you tax the top of the spectrum heavily, and the bottom not enough, you get high consumer spending, low investment. That is bad for the economy.
that is also what we have seen for the past couple of decades. In 2006, for example, our savings rate hit the lowest point it has been since
1933. Are you saying that in 2006 the tax rates on the top of the spectrum were too high, and the ones on the bottom too low?
I tend to suspect that an easy-money-cheap-debt monetary policy and the assumption that everyones' houses and government programs would be our permanent perfect nest eggs had more to do with it.
That's what we had under Carter and Reagan wisely adjusted it so that it was more balance. But people got caught up in the hype and made overly simplistic conclusions from that experience. They assumed that all cuts of taxes on the rich were therefore good for the economy. That, of course, is not true. Clinton and Bush2 both continued cutting taxes on the super rich to a much greater degree and we saw what happened.
a long period of historically low unemployment?