I’ve seen a couple of folks on the wires raise concerns about a 2/3 requirement to raise taxes, which was part of the budget plan that passed the House this week. I wanted to take a moment to explain why the 2/3 majority requirement makes sense and is so important.
The historical average percentage of GDP that the government collects in taxes is 17.8% and has been since 1947, regardless of tax rates. History has illustrated time and again that rates higher than 18% tend to depress economic activity to such an extent that the net effect on total federal government revenue comes back down to the 18% average.
Where we run into problems is when liberals who have not studied economics or have no knowledge of economic history get greedy and decide it’s “possible” to get a higher percentage of GDP than the historical 18% and raise rates to try to get it. Experience has shown that these efforts invariably fail, but that the economy suffers as a result, causing revenues to fall and deficits to rise. Soon those same liberals cry out for even more oppressive taxes increases to in order to close the new budget gap, which starts the cycle all over again. The 2/3 requirement is designed to return sanity to the budget process by forcing Congress to adhere to the reality that 18% of GDP is the most they can reasonably expect to achieve over any extended period of time. Without this provision, annual budgeting will continue to be like a dog chasing it’s tail as liberals continuously try to squeeze more money out of the economy and in fact get less.