This morning, US GDP 3rd quarter GDP was revised down from 2.5% to 2.%. Typically, of course, taxes are cut (and other stimulative measures are enacted) to avoid recessions.

Got me to thinking, why isn't our tax rate progressive visavis the government. In other words, if the tax rate we paid was indexed to GDP growth, it would seem to create a continuous feedback loop with stabilizing effects, stimulative in the worst of times, stabilizing in bubbly times, all without "fiat" currency manipulation.

When times are good, the government collects more money due to growth. When times are bad, government collects less, but we have more money to spend without having to pass legislation and hopefully create growth again.
-- theircompetitor, Nov 22 2011

Seems a reasonable suggestion but I think the arguments start when you come to try and establish the base level to start from.
-- DrBob, Nov 22 2011


I think the rate could be very different for an emerging economy versus an established one.

But it seems that this would be a great way to take politics and tinkering out of trying to maintain an economy on a stable growth path while neither overheating nor diving -- and actually getting revenue into government coffers when they are most available.

This doesn't address where individual rates would be -- that's a separate debate -- this is how anyone's individual taxes would relate to GDP.

The ratio of tax receipts to GDP is already discussed all the times -- but I don't believe that anyone's ever suggested autotuning it.

There is a "pro-cyclical" concern here -- during bad times, money collected falls faster, and vice versa -- but I think stimulus is enacted anyway in the form of rate manipulation, printing, and debt -- feels like this could reduce the need for that dramatically.
-- theircompetitor, Nov 22 2011


GDP is not a useful or accurate measurement of anything. Much better to peg taxes to government spending.
-- pocmloc, Nov 22 2011


//...peg taxes to government spending.//

We're doomed.
-- Grogster, Nov 22 2011


More or less so than usual?
-- Alterother, Nov 22 2011


The usual.
-- RayfordSteele, Nov 22 2011


The point would be to connect it to a measure of the economy's output, not government spending. GDP is adequate so long as trending is accurate.
-- theircompetitor, Nov 22 2011


and another one to dust off
-- theircompetitor, Mar 18 2020


//a "pro-cyclical" concern//

I'm not sure "concern" is a quite strong enough word here. As one Irish government minister said around the time of the GFC, "If I've got it, I'll spend it."

Apart from the John Howard government in Australia twenty-odd years ago, I can't think of any government anywhere that really walked the talk of counter-cyclical fiscal policy. Gordon Brown in the UK pretended to do it, but I heard that was mostly just dodgy accounting.
-- pertinax, Mar 18 2020


well that was 2011 :)

in theory -- that being the key word -- the key is all govts -- and industries -- know what happened in 08, and in 1918.

I suspect the US will ultimately spend as much as 5 to 10T -- maybe more.
-- theircompetitor, Mar 18 2020



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