In the late 1990s, coincident with the Internet bubble, federal revenues from the progressive income tax, spurred by the enormous realization of capital gains and Wall Street bonuses, grew much faster than GDP, rising briefly above the long-run 18% average to more than 20% before the bubble burst and the stock market crashed in 2001.

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States like California are feeling the effects of a big drop in tax revenues (after the Internet bubble burst) and now face painful choices as a result.

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In 2001, long after the bubble had burst, it was projecting tax revenues to remain at record levels well into the new millennium.

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The dotcom bubble of the late 1990s featured companies that were heavy on ideas but light on revenues or profits.

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For Warhols, Lichtensteins and Jeff Koons' work, the sales matched the Internet bubble in 1999 when tech houses with no visible earning power sold north of 10 times revenues or even a multiple of paid clicks.

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While this was misguided, tax revenues were booming (in part because of genuine growth and in part because of the bubble) and it seemed like bigger government was a free lunch.

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