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The Laffer Curve
Marginally Useful Material Launcher ^ | 30 January 2004 | Robert Sturgeon

Posted on 01/30/2004 7:51:52 PM PST by MegaSilver

Some of you may share the mistaken belief that the Laffer Curve, named for Dr. Arthur Laffer, was tested and found wanting during the Reagan Administration. Nothing could be farther from the truth. There are two possible causes for your error. The first is that you may simply not know what the Laffer Curve is. This, combined with a natural tendency to agree with the "conventional wisdom," may lead you to just mindlessly nod your head in agreement every time you hear some T.V. network reporter blithely dismiss the "discredited Laffer Curve."

The second possible cause for your error may be that you do not understand what results the Laffer Curve promises. This is really a part of the greater problem mentioned above, so let us begin there.

For us to gain a rudimentary understanding of the ideas incorporated into the Laffer Curve, we must understand a tiny bit about economics. Economics is really just basic human psychology as applied to money and business affairs. We assume that people will react to the realities of the world of money and business more or less like they react to any other set of stimuli. They tend to act in their own and their family and friends' best interests, as they see them. The Laffer Curve results from our assumptions about how people will react to varying rates of income taxation. Now we must put our understanding of human nature to work. We must ask ourselves two questions, the answer to the first being obvious, and the answer to the second being not so obvious, but just as certain. The first question is, "If the income tax rate is zero %, how much income tax revenue will be raised?" The answer is, of course, "None."

Now, here is where it gets a bit tougher. The second question is, "If the income tax rate is 100%, how much income tax revenue will be raised?" To answer this question, we must place ourselves in the position of an income earner who faces a tax rate of 100% on every extra dollar he earns. Will he have any reason whatsoever to earn any more money? The answer is, "No, he won't." He will refrain from any activities likely to result in taxable income. So the income tax revenue from a 100% income tax will be zero, or nearly zero. There will always be a few suckers who go ahead and earn some money, only to have it taxed away. But the number of people willing to do so must be exceedingly small. For all practical purposes, the number is zero.

Okay, now we get to the nub of the "infamous" Laffer Curve. We must take the ideas discussed above and reach some conclusions. The reasoning goes like this: If a zero % income tax rate brings in zero revenue, and if a 100% income tax rate brings in zero revenue, the tax rate which will bring in the most revenue must be somewhere between zero % and 100%. It necessarily follows that in a given economy, there is some optimal income tax rate which will bring in the most revenue possible. In that economy, a lower than optimal rate will bring less revenue, and a higher than optimal rate also will bring in less revenue. Are we all still together here? Did you get that? If not, go back and do it again. Keep doing it until you get it.

Okay, that is all the Laffer Curve claims. Let's all say this together, "In any given economy, it is possible that the income tax rates are already too high, and if the authorities wish to bring in more income tax revenue, they must lower the tax rates." Do we all understand that? Even the Democrats amongst us?

The Laffer Curve does not claim that lowering income tax rates will always bring in more revenue. It only claims that a lower income tax rate may bring in more revenue. If the tax rates are already very low, lowering the rates may not bring in more revenue. But if the rates are too high, lowering the rates will bring in more revenue.

The problem people tend to have regarding the Laffer Curve is that they confuse economics with their political considerations. Many people have political reasons to desire high income tax rates on the earnings of the rich. They wish to prevent the rich from earning more money, even if the resulting tax revenue is smaller than it would otherwise be, and the economy less productive than it would otherwise be. These people do not believe that the income tax on the rich can ever be "too high." They are willing to deprive the government of revenue and deprive the economy of the productivity of the rich, all for the sake of their politics. There really is no arguing this point, as it is merely the outward manifestation of envy.

The Laffer Curve does not address questions of envy and redistributionist politics. It only addresses the question of how to have the healthiest economy producing the highest income tax revenue.

The Laffer Curve does not claim to know exactly what tax rate is the "right" tax rate. In fact, the only way to know if the current tax rates are too high is to lower them, and see whether revenues increase or not. If the revenues increase, the rates were too high. If the revenues decrease, the rates were too low. Of course, it would be equally valid to run the experiment the other way around: raise the tax rates and observe the results. The choice is the politicians' to make, based upon whether the current rates "seem" to be high or low. In 1981, the rates seemed rather high. The Laffer Curve experiment showed that the rates were, indeed, too high.

Now, let us consider whether the Laffer Curve "failed" to deliver on its promises during the Reagan administration. Remember, the Laffer Curve does not promise to balance the budget. The Laffer Curve does not promise to solve social problems. The Laffer Curve does not promise to force elected representatives to propose and enact lower spending programs. The Laffer Curve only promises that, if the tax rates are too high and they get lowered, revenues will increase. Income taxes were lowered (and "flattened") during the Reagan administration. Income tax revenues increased. In fact, they increased a great deal. Unfortunately, neither the Republican Reagan administration nor the Democrat-controlled Congress were interested in lowering the rate of growth in federal spending. While the income tax revenues increased substantially, federal spending increased even more. The result was that the federal government ran up a staggering national debt. But please, let's not blame it on the Laffer Curve!


TOPICS: Constitution/Conservatism; Culture/Society; Editorial; Philosophy
KEYWORDS: laffer; laffercurve; liberalbias; taxes; taxreform
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As a business student, I can testify that the first time I saw the Laffer Curve, it made sense. It's just conventional wisdom. Of course, the *ss-kissing media would never let us know that.
1 posted on 01/30/2004 7:51:53 PM PST by MegaSilver
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To: MegaSilver
I was an econ major when Reagan was still cleaning up after Carter. While the leftists in the profession were still pooh-poohing Dr.Laffer's very logical thesis which proceeded to prove itself, they were justifying Carter's gross mismanagement of the economy with the Phillips Curve-- which attempted to explain why inflation and unemployment could both continue to rise until the public turned to the saving graces of a planned economy.

This is why the ruling Marxists in our current intelligensia have resorted to different tactics now-- they are determined to push their version of free trade and open borders until the middle class disappears and only a multi-cultural ruling elite are left at the top of the pyramid to manage the rest of us livestock.

2 posted on 01/30/2004 8:05:05 PM PST by Vigilanteman
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To: MegaSilver
The Laffer curve was "invented/drawn" by Laffer on a napkin in a restaurant. It lacked much substantive content then, and lacks much substantive content now. Of course a 50% tax rate will bring in more revenues than a 99% tax rate. It is those noisome more "marginal" percentage figures, that are the rub. On that, Laffer provides no assistance.

By the way, for purposes of full disclosure, Laffer was once a professor of mine. When he was, I had almost as much hair as he did. No longer. Recently, his cousin, was a hostile expert witness in a trial in which I was called upon to litigate. I quite enjoyed shredding cousin Laffer. The subject was check kiting. The opposing counsel "assumed" I also sported a CPA in his closing brief. The assumption was erroneous, but I took it as a compliment. And so it goes.

3 posted on 01/30/2004 8:07:03 PM PST by Torie
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To: MegaSilver
The news media has taken on themselve to "educate" us as to whatever it is! Lot of it is that they themselves don't understand it.

They should stick to just reporting the fact and let us do the intrepreting.

Of couse, that's just wishful thinking. Oh, well!

4 posted on 01/30/2004 8:07:33 PM PST by Sen Jack S. Fogbound
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To: MegaSilver
This is a good commentary. The Laffer Curve is a great idea. I can deal with a healthy debate on the shape of the curve tho.
5 posted on 01/30/2004 8:11:33 PM PST by Pappy Smear
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To: Pappy Smear
I can deal with a healthy debate on the shape of the curve tho

Nobody knows the shape, even the approximate shape, although the shape obviously varies over time based on a whole host of factors, macro, micro, and cultural. The data is two "noisy" because there are too many variables. Awareness of the unknown is a key step to good judgment, and the pursuit of knowledge.

6 posted on 01/30/2004 8:15:51 PM PST by Torie
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To: Torie
By the way, the shape may reverse direction for awhile. Higher tax rates up to a point might force folks to work harder to maintain their standard of living. Oh the horror.
7 posted on 01/30/2004 8:18:01 PM PST by Torie
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To: MegaSilver
As a business student, I can testify that the first time I saw the Laffer Curve, it made sense.

I'm sure it did, since it's all about maximizing revenue, something all businesses and governments seek to do. The difference between the two, however, is that the government has the legitimate threat of force on its side--they can just stick a gun in our faces and say, "pay up, sucka". I think it was Madison that said the power to tax is the power to destroy, and today taxation is as much a tool used to destroy the opposition (and conversely reward the loyal) as it is a revenue-raising tool.

8 posted on 01/30/2004 8:23:21 PM PST by randog (Everything works great 'til the current flows.)
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To: Torie
Ah, I remember the Laffer curve concept. It was in Econ class way back when I had more hair and was a little less cynical.

I certainly do not profess any great expertise in the 'soft science' of Economics. I decided to continue my education in the more concrete sciences of biology and chemistry.

One thing about Laffer that has always bugged me, and maybe some enlightened soul could clarify it for the class:

While Laffer indicated that IF taxes were TOO high, lowering them would actually increase revenue, he never really indicated how much was TOO much. What is the proper balance of taxation and maximum revenue?

(Yes, this is a devil's advocate question, so please refrain from your Adam Smith/Milton Friedman retorts. I'm already a member of the choir).

Yours in Capitalism,

MDSpinboyRedux
9 posted on 01/30/2004 8:27:27 PM PST by MDspinboyredux
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To: MDspinboyredux
he never really indicated how much was TOO much

Laffer may have been a bit dumb (and frankly he was never a leading intellect in economics ever; he got by with his connections and charm, both of which were considerable), but he is not stupid. As I said before, nobody knows, in part because it is a moving target, and in part because there are so many variables, that it is next to impossible either to verify the hypothesis, or falsify it, within the reasonable range of public policy choices. Hypotheses that cannot be verified or falsified are worthless.

10 posted on 01/30/2004 8:31:27 PM PST by Torie
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To: Torie
Higher tax rates up to a point might force folks to work harder to maintain their standard of living.

That's precisely the argument that Democrats use to rationalize higher taxes. We'll just work harder and there won't be negative economic effects.

11 posted on 01/30/2004 8:36:39 PM PST by BfloGuy (The past is like a different country, they do things different there.)
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To: MDspinboyredux
What is the proper balance of taxation and maximum revenue?

I recall hearing 15%, I don't know from where or from who, but 15% keeps sticking in my mind.

12 posted on 01/30/2004 8:47:12 PM PST by Sinner6
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To: Torie
Heh-heh! I agree with your analysis! Be as ambiguous as possible and you can make a living as an Economist......... or a Meterologist!

The MDSpinboyRedux hypothesis:

Tomorrow it will either rain or it won't.

I'm a genius! Colleges around the nation should dedicate many hours of class discussion to my astute observation!
13 posted on 01/30/2004 8:53:39 PM PST by MDspinboyredux
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To: Sinner6
Are you thinking of Malcolm Forbes?

Didn't he push the 15% idea back in 1992 when he ran for Pres?
14 posted on 01/30/2004 8:56:24 PM PST by MDspinboyredux
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To: Torie
"Awareness of the unknown is a key step to good judgment, and the pursuit of knowledge."

What is this "awareness of the unknown?" Some kind of lawyer's algebra? If it is unknown, then who could possibly be aware of it? Who, exactly are the elite that are posessed of this special awareness that no one knows a danged thing about, huh? Please reply immediately!!!

I guess the French Revolution din't behead 'em all.

15 posted on 01/30/2004 9:01:46 PM PST by SierraWasp ("A wise man's heart is at his right hand, but a fool's heart is at his left." Ecclesiastes 10:2)
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To: Sinner6
Hey Sinner, you need God! He uses 10% flat!!! Pretty successful for the clerics, for nearly 2000 years, even with many "backsliders" not paying most of the time. How 'bout dat?
16 posted on 01/30/2004 9:06:14 PM PST by SierraWasp ("A wise man's heart is at his right hand, but a fool's heart is at his left." Ecclesiastes 10:2)
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To: MegaSilver
Bueller?
17 posted on 01/30/2004 9:07:19 PM PST by Tribune7 (Vote Toomey April 27)
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To: SierraWasp
Any scientist in most fields will amaze you with a rendition of what is known to be unknown in his or her discipline. What do you think electricity really is, and why it has the properties it does? What do you think causes gravity to be a force? What about matter really generates it, and why? Why does molten matter generate magnetic fields? Just why do the magnetic fields flip from time to time? Why is the ocean salty? How many species of life do you think on on this planet? Is it more likely to be 2 million, or closer to 200 hundred million? What do you think is "known" about that?
18 posted on 01/30/2004 9:10:35 PM PST by Torie
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To: Torie
The Laffer Curve is a rough graphic representation of the very very old "Law of Diminishing Returns", which must go back ... I would guess centuries ... in the field of economics. Somehow Laffer gets credit for it. Me, I'm looking for a way to draw a cartoon that will get me the credit for inventing Newton's Second Law of Thermodynamics.
19 posted on 01/30/2004 9:14:19 PM PST by DonQ
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To: DonQ
Well the sexy part of the Laffer Curve, as publicized, is the Law of Negative Returns, not diminishing returns. You mission, should you choose to accept it, is to find where that begins, and why and when, and depending on what. A piece of cake, no?
20 posted on 01/30/2004 9:17:54 PM PST by Torie
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To: Torie
"What do you think is "known" about that?"

"Fascinating!" God only knows!!!

21 posted on 01/30/2004 9:25:09 PM PST by SierraWasp ("A wise man's heart is at his right hand, but a fool's heart is at his left." Ecclesiastes 10:2)
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To: MegaSilver
Wait a minute! Aren't we talking about Larry Laffer?


22 posted on 01/30/2004 9:31:49 PM PST by Wumpus Hunter (<a href="http://www.michaelmoore.com" target="_blank">miserable failure)
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To: MegaSilver
I'm a dittohead, I know what the Laffer Curve is.
23 posted on 01/30/2004 10:01:35 PM PST by GigaDittos (Bumper sticker: "Vote Democrat, it's easier than getting a job.")
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To: Torie
How about the fact that an electron has a mass approaching zero (for all practical purposes it is zero, but due to limitations in the equipment used to measure such things it still shows some mass) yet has "spin?"
24 posted on 01/30/2004 10:01:55 PM PST by stylin_geek (Koffi: 0, G.W. Bush: (I lost count))
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To: stylin_geek
You mean it has less mass than a photon?
25 posted on 01/30/2004 10:15:04 PM PST by GigaDittos (Bumper sticker: "Vote Democrat, it's easier than getting a job.")
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To: stylin_geek
How about the fact that an electron has a mass approaching zero (for all practical purposes it is zero, but due to limitations in the equipment used to measure such things it still shows some mass)

No. Electron mass = 9.10938188 × 10-31 kilograms. That's not zero, practically or theoretically.

yet has "spin?"

They spin because electrons have intrinsic angular momentum. Moreover, photons have no mass, but they have a lot of interesting properties, don't they?

26 posted on 01/30/2004 10:23:12 PM PST by Hawkeye's Girl
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To: GigaDittos
Yes.

Proton mass = 1.67262158 × 10-27 kilograms.
Electron mass = 9.10938188 × 10-31 kilograms.

27 posted on 01/30/2004 10:25:12 PM PST by Hawkeye's Girl
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To: Hawkeye's Girl
I had a little chemistry once. I sorta knew that.
28 posted on 01/30/2004 10:26:34 PM PST by GigaDittos (Bumper sticker: "Vote Democrat, it's easier than getting a job.")
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To: GigaDittos
I'm sure you did :-)
29 posted on 01/30/2004 10:27:44 PM PST by Hawkeye's Girl
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To: Torie
That is the truth. Laffer persists (like Keynesian theory persists and monetary theory persists) because it can't be falsified.
30 posted on 01/30/2004 10:29:19 PM PST by Pitchfork
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To: MegaSilver
It is a testament to effective self-publicity that a simple Elasticity Curve, when applied to tax rates, received the name of "Laffer Curve". Laffer hardly "invented" the curve, but because most people have no reason to study academic economics they are easily buffaloed into believing that nonsense.

The Laffer Curve doesn't provide any useful predictive information, because there is no way to apply numbers to the curve, or in fact know what its shape is. You have two problems: you have no way of knowing where you are on a curve whose shape you also can't draw.

The closest thing to an actual "Laffer Curve" is the study of the effect the Reagan tax cuts, an exhaustive regression analysis done by Larry Lindsey, Dubya's first economic advisor. The finding of Lindsey's study is that the Reagan tax cuts generated enough growth to recoup 2/3 of each dollar cut. The tax cuts didn't pay for themselves, as many supply-side journalists like to claim, but they also only cost the Treasury one-third of the amount that static analysis predicted.
31 posted on 01/30/2004 10:29:31 PM PST by Pelham
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To: Pelham
I didn't realize we had so many geniuses on this board. So many people that know so many things. Amazing. Truly amazing.
32 posted on 01/30/2004 10:32:33 PM PST by GigaDittos (Bumper sticker: "Vote Democrat, it's easier than getting a job.")
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To: Pelham
What is the tradeoff when you cut the highest marginal rates, not from 50% for earned income, and 70% for unearned income, to around 30%, but rather from 40% to around 35%, or or somewhat more than 35%, given the AMT kicking in? And of course, the regression analysis, with only one data set, is suspect to begin with. What co-variables, correlated with the tax cuts perhaps by the accidentally and coterminously, might have been at play? Maybe the regression analysis has a bit of GIGO in it, and maybe if honestly rendered, as a low T stat confidence level.
33 posted on 01/30/2004 10:39:25 PM PST by Torie
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To: GigaDittos
I'm a dittohead, I know what the Laffer Curve is.

One thing Rush doesn't get right is Reaganomics. You'd be much better served by reading what Reagan's economists have written, than to take Rush's accounts seriously. He's often 180 degrees out from what they have to say. I sometimes wonder where he gets his information, as it's certainly not from the economists who worked for President Reagan.

34 posted on 01/30/2004 10:43:52 PM PST by Pelham
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To: MDspinboyredux
All I can tell you is that the fast-growing economies of Asia in 1970-1990 had one thing is n common: Tax rates of 15% or less. Those with higher tax rates had significantly slower growth.
35 posted on 01/30/2004 10:44:36 PM PST by cookcounty (Army Vet, Army Dad.)
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To: Torie
Lol. Piece of cake, I'll have the answer for you in a jiffy.

Lindsey's study was published as "The Growth Experiment", and includes all the variables that he used for his study. As I recall they were about as eye-glazing as that list you just made.
36 posted on 01/30/2004 10:47:43 PM PST by Pelham
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To: GigaDittos
I dunno about genius. But by reading a few too many obscure books on economics and politics, with a view to the "supply-side" movement, you end up knowing a lot of mostly useless information. For an intro you could read

Reaganomics- Niskanen
Revolution- Anderson
The Growth Experiment- Lindsey
The Supply Side Revolution- Roberts
Reaganomics- Bartlett
Wealth and Poverty- Gilder
The Way the World Works- Wanniski
The Seven Fat Years- Bartley


37 posted on 01/30/2004 10:59:30 PM PST by Pelham
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To: MDspinboyredux
(Yes, this is a devil's advocate question, so please refrain from your Adam Smith/Milton Friedman retorts. I'm already a member of the choir). Yours in Capitalism,

How about the take that the liberal website Economist.com takes on the Laffer Curve . . .

The Laffer Curve

Legend has it that in November 1974 Arthur Laffer, a young economist, drew a curve on a napkin in a Washington bar, linking AVERAGE tax rates to total tax revenue. Initially, higher tax rates would increase revenue, but at some point further increases in tax rates would cause revenue to fall, for instance by discouraging people from working. The curve became an icon of supply-side ECONOMICS. Some economists said that it proved that most governments could raise more revenue by cutting tax rates, an argument that was often cited in the 1980s by the tax-cutting governments of Ronald Reagan and Margaret Thatcher. Other economists reckoned that most countries were still at a point on the curve at which raising tax rates would increase revenue. The lack of empirical evidence meant that nobody could really be sure where the United States and other countries were on the Laffer curve. However, after the Reagan administration cut tax rates revenue fell. American tax rates were already low compared with some countries, especially in continental Europe, and it remains possible that these countries are at a point on the Laffer curve where cutting tax rates would pay.

If the truth is inconvenient for your world view... LIE.

All of this obfuscates the REAL point of the Laffer Curve.

On the graph above, the Y axis represents Tax Revenues and the X axis represents Tax Rates (0-100%), "T" is the optimal revenue return to the government and the point of beginning discouragement by the public to working more to produce more. Although it may look like a 50% tax rate, it is not necessarily so, that is merely an artifact of the drawing.

Finding "T" is not the point of the Laffer Curve nor was it Laffer's observation that he was illustrating on that napkin. If that were the case the graph would be merely a reverse price/demand curve that any economist would recognize.

The point that Laffer was illustrating is that for ANY given revenue, there are TWO tax rates that will produce the same revenue for the taxing agency. Draw a horizontal line across the curve from the revenue axis and you will see that the line intersects the curve both on the increasing and on the decreasing arcs of the curve. In other words a return of 100 units of revenue can be received from a 25% and a 75% tax rate (just examples, we really don't know what the rates for equal return are... sort of an economic Uncertainty Principle).

The liberal economists at Economics.com fail to realize the other effect of selecting the lower of the two equal revenue return tax rates. Supply siders noticed the duality of the curve and, being greedy capitalists that they are, not to mention hardheaded business oriented people, realized that the LOWER tax rate left more money in the hands of said greedy capitalistss while STILL giving the government the same revenues. They knew that money left in private hands could and WOULD be invested in making more income, which also could be taxed, resulting in HIGHER revenues to the taxing agency. It was this phenomenon that DID, in fact, increase government revenues in the Reagan years, despite drastically lower tax rates!

38 posted on 01/30/2004 11:49:31 PM PST by Swordmaker (This tagline shut down for renovations and repairs. Re-open June of 2001.)
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To: MDspinboyredux
What is the proper balance of taxation and maximum revenue?

I seem to recall some very recent studies that put it right around the 5% range, plus or minus a couple percent, for the general case that we have now. Interestingly this pretty much describes the US up into the 20th century before taxation became all the rage.

There are some additional factors in the model that make the specifics more complicated but as a ballpark rule, the optimal number is ALWAYS less than 10%. At least in theoretical literature.

39 posted on 01/30/2004 11:57:09 PM PST by tortoise (All these moments lost in time, like tears in the rain.)
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To: cookcounty
Of course those Asian countries do not need high tax rates, because they don't have all these entitlement programs to pay for.

You can also argue that those European countries, with all their entitlement programs and high tax rates, have done fairly well too. They have maintained fairly high standard of living for their citizens.
40 posted on 01/31/2004 2:25:18 AM PST by Fishing-guy
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To: Tribune7
Bueller?

"This is very controversial. Does anyone know what Vice President Bush called this in 1980? Class, anyone? Something... d-o-o economics... voodoo economics."

41 posted on 01/31/2004 4:21:18 AM PST by MegaSilver
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To: Pelham
It is a testament to effective self-publicity that a simple Elasticity Curve, when applied to tax rates, received the name of "Laffer Curve". Laffer hardly "invented" the curve, but because most people have no reason to study academic economics they are easily buffaloed into believing that nonsense.

Yep; remember, the media has a conservative bias. ;)

The Laffer Curve doesn't provide any useful predictive information, because there is no way to apply numbers to the curve, or in fact know what its shape is. You have two problems: you have no way of knowing where you are on a curve whose shape you also can't draw.

That doesn't mean the concept itself is useless; in mathematics, when you have the shape of a curve, you at least know whether or not you have a bleeding chance at recouping revenue if you significantly lower taxes.

The closest thing to an actual "Laffer Curve" is the study of the effect the Reagan tax cuts, an exhaustive regression analysis done by Larry Lindsey, Dubya's first economic advisor. The finding of Lindsey's study is that the Reagan tax cuts generated enough growth to recoup 2/3 of each dollar cut. The tax cuts didn't pay for themselves, as many supply-side journalists like to claim, but they also only cost the Treasury one-third of the amount that static analysis predicted.

Just how much, if at all, did the income tax rate "flatten out" under Reagan? Is there a table of income tax brackets in various years last century?

42 posted on 01/31/2004 4:26:37 AM PST by MegaSilver
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To: MegaSilver
The real problem is marginal rates. For example: a couple a nurse and a lawyer one child under 17,are married the nurse makes $70,000, the lawyer $50,000.

Now if only nurse works, after child tax credit, standard deduction and exemptions, the federal income tax is about 10 percent ($7,000).
However if the lawyer works each dollar he earns the 27 percent rate applies. For $120,000 combined gross income the FICA due is $21,000, the effective rate is 17.5%
Now lets add in state and Social Security and Medicare.

SS and Medicare are 7.5%, assume 2.5% state income tax = 10%
The nurse alone pays $7,000 in FICA and $7,000 in state & ss and medicare. $14,000 is 20% of the nurse's gross income.
If the lawyer is added.
The lawyer pays $5,000 state, ss & medicare, and the couple pays $14,000 in additional federal income tax. $19,000 is 38% of the lawyer's income. Together they would pay $33,000 in FICA, State, SS & Medicare which is 27.5%

This is why the middle class is getting F***ed by the system
43 posted on 01/31/2004 5:02:28 AM PST by tort_feasor ( anti-Semitism is not a lifestyle choice)
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bump for later read
44 posted on 01/31/2004 5:19:18 AM PST by Freebird Forever
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To: Hawkeye's Girl
Wow, I really crashed and burned on that one. Obviously I have the wrong particle. I will have to dig up my book and get the correct answer. That's what I get when I try going from memory, and not checking my facts. Of course, this is why I am interested in politics, 'cause as a politician, I would never let the facts get in the way.
45 posted on 01/31/2004 6:13:56 AM PST by stylin_geek (Koffi: 0, G.W. Bush: (I lost count))
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To: tort_feasor
Even these percentages leave out the hidden taxes payed by employers for the privilege of paying someone. They are essentially a hidden withholding that doesn't even seen by the average worker. Unfortunately, I myself don't really know what those percentages are. My expectation is that they add at least another 10%.
46 posted on 01/31/2004 6:31:54 AM PST by Nevermore
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To: MegaSilver
Yeah, the Laffer curve is valid. But this article is based on a bad assumption: that it is right for the government to take in the highest revenues it can.
47 posted on 01/31/2004 6:39:21 AM PST by expatpat
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To: MegaSilver
i do not find the laffer curve funny at all...

and yet, its smile seems to mock me wherever i go...

48 posted on 01/31/2004 7:22:59 AM PST by teeman8r (turn your frown upside down... embrace the laffer curve)
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To: Fishing-guy
You can also argue that those European countries, with all their entitlement programs and high tax rates, have done fairly well too. They have maintained fairly high standard of living for their citizens.

Don't they have, like, double-digit unemployment rates? And their efficiency's pretty low, too... not to mention that prescription drug programs like Canada's are leeching off of U.S. consumers.

49 posted on 01/31/2004 11:00:39 AM PST by MegaSilver
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To: MegaSilver
Save Ferris.
50 posted on 01/31/2004 12:32:05 PM PST by Tribune7 (Vote Toomey April 27)
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