Federal Government Revenues as a Share of GDP

I was reading PGL’s latest and this quote by Donald Lusking caught my eye:

According to the AARP, it is meaningless that federal tax revenues are already at an all-time high in dollar terms. The paper claims that revenues “are still below their long-run average, and substantially below where they need to be.” Actually, at an estimated 18.5 percent of GDP in 2007, revenues are above – not below – the 18 percent average of the last 50 years. They’ve only been higher than today in 6 of the last 20 years, and 9 of the last 50.

I want to add something to PGL’s comments about this paragraph, especially because the 18.5% figure is a favorite of our resident troll (OK – he’s not our troll – we share him with other sites like Maxspeak), Patrick R. Sullivan. Since Sullivan and Luskin are always happy to use this figure to justify Republican tax policies, let me point out something very, very simplistic…

The table below shows the average revenue as a percentage of GDP for selected non-random blocks of years during Luskin’s last 50 year period. (Data from the White House’s Office of Management and Budget Table 1.3.)

It also shows the same figure for all 50 years, for years in which Republicans were in office, and for years in which Democrats were in office.

I’m not in the mood to do a
means test right now, but Republicans do seem to collect less revenue. A few random oddities… the highest collections in the Nixon-Ford years occurred in 1969, the highest in the Reagan years occurred in 1981, the highest in the GHW years occured in 1989, and the highest in the GW years occurred in 2001. In other words… for Republicans, collections as a percentage of GDP generally dropped once they put their own tax policies in place.

Meanwhile, the lowest tax collections as a percentage of GDP during the Carter era occur ed in 1977 and 1978, and the lowest in the Clinton years occurred in 1993. The highest collections occurred during their last year in office.

Put another way… if the goal is to maximize government revenue as a share of GDP, its best not to have a Republican President.

But in the end, who really cares about government revenue? What matters is whether people are getting better off or not. As (another) first approximation, we might look at real growth per capita, preferably after taking into account changes in the federal debt. And we already know what that looks like.


If you want my spreadsheet, let me know.