Does North Carolina follow Hauser’s Law?

Date posted: February 3, 2011

Host Mary Walden tells N.C. State University economist Mike Walden, “I know North Carolina often implements new laws at the beginning of the year, but I don’t remember any recent one being called Hauser’s law. I have a sneaky suspicion the law you are talking about isn’t the legal kind. Am I right?”

Dr. Walden responds: “Well you are right, Mary. You get an A+ for perceiving that. What we are talking about here is an economic law — in quotes. And all we mean by economic law is some relationship that some economists feel so strongly at that they call it a law. Law of demand is a good example.

“And here we are talking about something called Hauser’s Law, and it was named after an economist who looked at the federal government and looked at federal tax revenues as a percent of the economy. And what he noticed that over a long period of time, that percentage didn’t vary very much. It hovered around 19 percent. So regardless of all the changes in the tax law, tax rate going up, tax rates going down, more deductions, less deductions, etc., what Hauser noticed was, ‘Gee, tax revenues as a percent of the economy always come in at about 19 percent.’

“Now the question is, Well, do we have anything like that in North Carolina? Do we have a North Carolina version of Hauser’s Law? So what I did is I looked at North Carolina tax revenues both for the state and local governments combined over a long period of time. And what I found is that our version would say that percentage is close to 6 percent or low 6 percent, ranging from about 5.9 percent of the North Carolina economy going to state and local tax revenues up to a high of 6.6 percent.

“So again Hauser’s law doesn’t say it is absolutely 19 percent, and in North Carolina we don’t have one number, but there is a rather narrow range that tax revenues do seem to follow.”

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