It can be argued that the taxes we pay to the federal government are well above the sweet spot, meaning that when the government increases taxes the expected revenues will not meet projections. Others seem to believe no tax rate is too high and that the rich, meaning those of us with jobs that actually pay taxes, should have even more of our money taken from us to fund things we neither need or want.
Now comes what is being called Hauser's Law, which states that regardless of the total tax burden of the American taxpayers (this includes all taxes imposed, and not just on individuals), the revenues collected will be less than 20% of Gross Domestic Product. The chart below, created by using the National Income Accounting method rather than the CBO or OMB methods, shows that since 1929 the revenues collected have always been below 20% of the GDP. (The chart isn't all that clear, but it is readable...sort of.)
As tax rates increase economic activity slows when billions are siphoned out of the economy and used for non-wealth producing activities. The more money siphoned out of the economy, the more economic growth declines and the less revenue is collected by the government. Hauser's Law implies the Laffer Curve, showing revenues fall as taxes rise or fall above a certain point.
Far too often those projections fall victim to the Law of Unintended Consequences, where higher taxes on some economic activity discourages that activity, in turn lessening the activity being taxed and reducing the revenues expected. (Ayn Rand wrote about that over 50 years ago in Atlas Shrugged, though she's not the first to do so.)
What's the origin of this limit beyond which it is impossible to extract any more revenue from tax payers? The tax base is not something that the government can kick around at will. It represents a living economic system that makes its own collective choices. In a tax code of 70,000 pages there are innumerable ways for high-income earners to seek out and use ambiguities and loopholes. The more they are incentivized to make an effort to game the system, the less the federal government will get to collect. That would explain why, as Mr. [W. Kurt] Hauser has shown, conventional methods of forecasting tax receipts from increases in future tax rates are prone to over-predict revenue.
But we know that won't stop our tax and spend Congress from taxing the hell out of everything that moves in an effort to pay for all the 'free' programs they and the President are trying to shove down our throats. Too bad they'll be limited by Hauser's Law, meaning they'll keep spending far more than they will ever be capable of collecting in taxes.