[Sherman Logan]

Tax cuts do not always increase revenue. It depends on where you are on the Laffer curve.

[central_va]

Tax cuts do not always increase revenue. It depends on where you are on the Laffer curve.

Who, except a total idiot, doesn't think we are WAAAAAAAAAAAY to the right of the inflection point on the laffer curve?

[YankeeReb]

Tax cuts do not always increase revenue. It depends on where you are on the Laffer curve.

Do you seriously think we have to worry about even getting near that point?

[CurlyDave]

Tax cuts do not always increase revenue. It depends on where you are on the Laffer curve.

While the Laffer curve represents reality, it is not the correct measure to determine tax policy.

Think of a new plot, the CurlyDave curve, where we plot GDP vs. tax rate. We want to adjust tax rates to maximize GDP, not to maximize government revenues.

[Hoodat]

Tax cuts do not always increase revenue.

The rule is that taxes inhibit economic growth. Tax revenues are a function of economic activity, but economic activity is not a function of tax rates. If economic activity increases, tax revenues increase. If economic activity decreases, tax revenues decrease.

Basically as a society, we should decide what fraction of our total economic output should go towards funding government, and then we should set rates accordingly. The only fair way to do that is to implement a flat tax. Historically, the current 'progressive' tax system has resulted in roughly 19% of economic output being directed into government coffers. We could implement a flat 19% rate (no deductions) and achieve the same numbers.

[Let_It_Be_So]

Tax cuts do not always increase revenue. It depends on where you are on the Laffer curve.

 

And it also depends on whether the only arrow in the quiver is tax cuts.

 

The key to government-initiated economic stimulation is whether tax cuts (especially with respect to the producers-businesses) are coupled with reduction/elimination of excessive regulatory burdens on those producers...in other words, a package that actually reduces unnecessary costs to the businesses, costs that are directly or indirectly attributable to the policies/laws/regulations of the government.

 

Sometimes, tax cuts in and of themselves will stimulate enough to produce a net increase in revenue to the government, but as you point out it would depend on where you are on the Laffer curve.  But couple tax cuts with other measures that actually reduce government-induced burdens on businesses, and you'll see economic growth every time, along with the associated increases in tax revenues tied to that growth.

 

Add to that tax cuts that allow individuals/families to keep more of their earnings and you have a recipe for sustained growth.

 

What would, in theory, do all of the above (from a tax standpoint)? 

 

Tax reform that replaces all taxes with a consumption tax (again, in theory).