Will Higher Federal Tax Rates Affect the U.S. Economy?


By Gary Stringer, Kim Escue, and Chad Keller, Stringer Asset Management

We hear a lot of concern about proposed increases in federal tax rates. At the broadest level, tax rate adjustments can be very impactful for an individual and corporation. As a result, changes to tax rates often require careful and effective planning to navigate. However, we do not think that the proposed changes in tax law will have significant economic impact.

Despite much concern over federal policy, federal tax revenue relative to the size of the U.S. economy has not change much since the second World War. As the following graph illustrates, federal tax revenue as a percentage of the U.S. economy changed dramatically with the advent of WWII and the larger government that has been in place ever since. However, overall tax revenue compared to the size of the economy has not changed much since the 1950s. This is especially true once we adjust for the business cycle. Over the last…

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