Does Taxing the Rich Help Increase U.S. Revenue as a Percent of GDP? (Historic Range: 1934 to 2011)

Does increasing the top marginal tax rate on the rich help the U.S. Revenue Problem?

In the chart above, the lower green line is the U.S. Revenue as a Percentage of GDP from 1934 to 2011.  From 1944 to 2011, the Average U.S. Federal Revenue as a Percentage of GDP was a steady 17.8% with the highest being 20.9% of GDP in 1944, during World War 2.  From 1944 to 2011, the U.S. Revenue as a Percentage of GDP remained in a relatively constant narrow band, despite the large range of tax rates during this time.  (Different Tax Rate Graph from VisualizingEconomics.com and PolicyGrinder.com)

The upper red line is the top marginal tax rate.  Despite the large changes in the top marginal tax rate (from 92% in the 1950s to 28% in the 1980s), the U.S. Revenue as a Percentage of Gross Domestic Product remained relatively constant.

From 1950 to 1963, the Top Marginal Tax Rate averaged between 91 and 92%.  The U.S. Revenue as a Percentage of Revenue during this time was 17.4%. 

From 1988 to 1989, the Top Marginal Tax Rate was 28%.  The Revenue as a Percentage of Revenue during this time was 18.3% (even higher than the 1950 to 1963 time period).

This observation of a steady U.S. Revenue as a Percentage of GDP is often called Hauser's Law.

Chart created by this techfarm.blogspot.com site, and data from the Tax Policy Center.

Profit from Big Government Healthcare Waste

There is a trend towards Big Government and Big Government Health Care, especially with the traditionally Big Government and Big Health Care Democrats having control of both the Executive and Legislative Branch of the United States.

With so much money being spent on Health care, Government sponsored Health care, there is a niche area to recover much of the waste and inefficiencies.

HMS Holdings (HMSY) is an $800 Million company that does just that.

HMS Holdings is the nation's leader in coordination of benefits and program integrity services for government health care programs. The company’s clients include health and human services programs in more than 40 states, 80 Medicaid managed care plans, the Centers for Medicare and Medicaid Services (CMS), and Veterans Administration facilities. HMS helps ensure that health care claims are paid correctly and by the responsible party. As a result of the company’s services, government health care programs recover over $1 billion annually, and avoid billions of dollars more in erroneous payments.

HMSY has a Forward PE of 32.20, and 5 year estimated growth rate of 26%, for a PEG of around 1.25 (PEG under 1 is a value, over 2, is too expensive).

The Stock chart of HMSY is showing strength (as of January 20, 2009), and the stock is above both the 50 day and 200 day moving average even in a bad market.

On January 13, 2009, HMSY has updated its earnings guidance for fiscal year ending December 2008, and due to better than forecasted business performance for the fourth quarter of 2008, the company is revising its 2008 full year EPS guidance from $0.77 to a range of $0.78 to $0.79.

All of this good news is occurring in a bad market.

The Company's website is www.hmsholdings.com.