Largest Tax Hike in History?<br> Outside of Killing Hitler, Yes.

Posted by Ryan Ellis on Thursday, September 30th, 2010, 2:40 PM PERMALINK

It turns out there's a good answer to that question.

Let's start with the context.  Page 15 (page 18 of the whole PDF) of this Treasury Department document lists all tax hikes and tax cuts as a percentage of GDP.  You can see that the largest is clearly the "Revenue Act of 1942," which raised taxes by a whopping 5.04 percent of GDP.  So that's our target.

So how do all the Obama tax hikes add up?

In order to figure this out, we'll need the numerator and the denominator of our fraction.  The denominator is easy.  CBO projects that nominal GDP over the next decade will be $187.7 trillion over this decade.  In order for the Obama tax hikes to be bigger than THE TAX HIKE WHICH PAID TO WIN WORLD WAR II, it would need to be at least 5.04 percent of this, or $9.46 trillion.

There are several components to this tax hike, all of which are conveniently scored by the same CBO:

  1. The 2011 income tax hikes.  These are the rate hikes, the capital gains and dividend hikes, the return of the marriage penalty and the death tax, etc.  CBO score: $2.567 trillion
  2. Failing to index the alternative minimum tax (AMT) to inflation.  CBO score: $558 billion
  3. Failing to stop dozens of business tax hikes ("extenders").  CBO score: $1.969 trillion
  4. Interactive effects of all these.  CBO score: $606 billion
  5. Obamacare tax hikes. CBO score: $525 billion

Add all of these up, and you get to $6.225 trillion over the next decade.  Expressed as a percentage of the economy, this is 3.31 percent of GDP.  That's the largest tax hike in history, except for the one that was used to fight simultaneous wars in Europe, North Africa, and the Asian Pacific Rim.

You got us, guys.  It's a mere 3.31 percent of GDP.  For context, historical tax revenues are about 18 percent of GDP, so this increases historical tax revenues by about a fifth.