Question

In the last 40 years, which has been more difficult to control: federal spending or tax rates? How do you know?

Answer 1

The answer clearly is federal spending. If you look at the tax rates in 1980, the highest marginal federax rate was 64% for incomes exceeding $109,400, whereas in 2020 the highest marginal tax rate is 37% for incomes exceeding $518,400. So tax rates have clearly come down (even as the income brackets have gone up).

In accordance with Laffer curve, the tax receipts of the govt has gone up even with declining tax rates. Hence it is the govt spending which has been more difficult to control.