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Hate the Laffer Curve? Try Woodhill's Curve
RealClearMarkets ^ | 09/15/2010 | Louis Woodhill

Posted on 09/15/2010 6:32:06 AM PDT by SeekAndFind

Liberals don't like the Laffer Curve. If you have any doubts, Google "‘Laffer Curve' +discredited" and peruse the 13,400 hits you get. Well, if Liberals hate the Laffer Curve (and they do), they are really going to hate the Woodhill Curve.

Professor Laffer originally stated his principle as follows: "For any tax, there are always two tax rates (a high one and a low one) that will produce the same revenue." The example he cited was that tax rates of zero and 100% would both bring in the same amount of revenue-namely, zero.

The Woodhill Curve extends the concept of the Laffer Curve in two ways:

1) It takes into account the element of time-the fact that the future matters; and,

2) It focuses on the impact of tax changes on total Federal revenues rather than on the revenue generated by an individual tax.

The principle behind the Woodhill Curve can be stated as follows: "There are an infinite number of combinations of "tax take" (Federal revenues as a percent of GDP) and average annual real economic growth rate that will yield the same present value (PV) of future Federal revenues." While the shape of the Laffer Curve is a matter for speculation, it is possible to quantify the shape of the Woodhill Curve. As it happens, the results of the calculations are very bad news for liberal tax hikers, but very good news for supply-side tax cutters.

Financially, it is the PV of Federal revenues that really matters, not just tax revenues in the current year. This is why the Social Security Trustees use PV as their ultimate measure of the long-term financial condition of Social Security.

(Excerpt) Read more at realclearmarkets.com ...


TOPICS: Business/Economy; Culture/Society; News/Current Events; Philosophy
KEYWORDS: laffercurve; spending; taxes; woodhillscurve

1 posted on 09/15/2010 6:32:07 AM PDT by SeekAndFind
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To: SeekAndFind; FatherofFive

BTTT


2 posted on 09/15/2010 6:35:34 AM PDT by verga (I am not an apologist, I just play one on Television)
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To: SeekAndFind

So, where’s the curve?


3 posted on 09/15/2010 6:37:43 AM PDT by shove_it (have a nice day)
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To: verga

You can’t discredit an idea that is self evidently true. You can argue about where we are on the curve.

And I don’t know how you can argue about that since EVERY time we lower tax rates revenues increase.


4 posted on 09/15/2010 6:38:27 AM PDT by DManA
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To: DManA

Well, Obama basically said he’s going to increase the tax on “the rich”, not because it will increase revenues but because “it’s the right thing to do.”

“You can not use reason to argue a man out of a position he didn’t use reason to get into.” - Somebody Famous.


5 posted on 09/15/2010 6:43:43 AM PDT by coloradan (The US has become a banana republic, except without the bananas - or the republic.)
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To: DManA

I made my own personal Laffer Curve and added the Atlas Shrugged point. Everyone has one.


6 posted on 09/15/2010 6:44:40 AM PDT by massgopguy (I owe everything to George Bailey)
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To: SeekAndFind

Thank you.
Add this to my list
Laffer Curve
Hauser’s Law
Woodhill Curve

Liberals can’t do math.


7 posted on 09/15/2010 6:44:40 AM PDT by griswold3 ('Regulation and law without enforcement is no law at all)
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To: griswold3
Liberals can’t do math.

Nor do they understand that there are consequences to their actions.

8 posted on 09/15/2010 6:47:18 AM PDT by kosciusko51
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To: DManA
And I don’t know how you can argue about that since EVERY time we lower tax rates revenues increase.

And, the Democrats and RINO's know it full well. Despite what they constantly spew, taxation from the gubmint's perspective isn't all about raising money. Taxation at this point is far more about controlling behavior. When you control behavior you have power. Power is what they are after, not money. They are admitting it every time they claim they want to raise taxes in order to raise gubmint revenue. Exactly the opposite happens. Now, if we could just get another Conservative to stand up and articulate that point as well as Reagan did......

9 posted on 09/15/2010 6:50:35 AM PDT by Thermalseeker (Stop the insanity - Flush Congress!)
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To: massgopguy

Interesting question: What is the Atlas Shrugged point?

The peak? 50% drop? 75% drop?


10 posted on 09/15/2010 6:50:41 AM PDT by DManA
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To: Thermalseeker
And, the Democrats and RINO's know it full well.

I is painful beyond endurance to think a fellow citizen would deliberately destroy our country, but I am reluctantly coming to that conclusion.

11 posted on 09/15/2010 6:52:37 AM PDT by DManA
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To: kosciusko51
Nor do they understand that there are consequences to their actions.

The follower Libs may not realize the consequences of the policies they support, but you can bet your last dollar that the elitist establishment Liberals know exactly the consequences of their actions and it ain't about making the country prosper.....

12 posted on 09/15/2010 6:53:46 AM PDT by Thermalseeker (Stop the insanity - Flush Congress!)
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To: SeekAndFind; ml/nj; All
I'm always appalled by the idiotic quotes you will see in the MSM from leftists whenever tax cuts are proposed as a way to grow the economy. Like an old broken record, the leftist politician will say, to paraphrase, "we (by which he means GOVERNMENT) can't afford to pay for that tax cut." In doing so, he reveals that he has no concept of supply side theory or the Laffer curve, but rather holds to the myth that taxes are a zero-sum game. He holds to this disproved theory like someone who believes that the earth is flat, and too many his dumb constituents go along with it.

I don't even know whether college economics majors these days have any exposure to Laffer's theory, though it's been proved by real life experience whenever tax cuts have been tried. Actually, the idea of lower tax rates as a stimulus to the economy didn't start with Laffer; it goes back at least to the 1920s and Andrew Carnegie.

13 posted on 09/15/2010 6:54:25 AM PDT by justiceseeker93
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To: Thermalseeker
" Power is what they are after, not money."

EXACTLY. By raising taxes, they take money from the productive and the savers and redistribute it to the politically connected. The formula they follow is vote maximization.

It's simply a monarchy with several ruling families vying for control (Kennedys, Clintons, etc.) and their courtiers vying for favors. We are the peasants.
14 posted on 09/15/2010 6:58:24 AM PDT by Darteaus94025
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To: DManA
I is painful beyond endurance to think a fellow citizen would deliberately destroy our country, but I am reluctantly coming to that conclusion.

When you look at things like the deliberate dumbing down of the country through the publik skools, the way they cozy up to Marxist thugs, allowing Iran to get the bomb while simultaneously pulling out the missile defenses from eastern Europe, the way we've gone from barely speaking to China to being their largest debtor in less than 40 years, and all the other things contrary to America's success that I haven't mentioned, it becomes clear that the strategy is to weaken the USA to the point of collapse. It's Cloward-Piven. There's really no other explanation and it's been going on for a very long time on both sides of the aisle.....

15 posted on 09/15/2010 7:00:22 AM PDT by Thermalseeker (Stop the insanity - Flush Congress!)
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To: griswold3
"Hauser’s Law"

Thanx. I had not heard of that.

16 posted on 09/15/2010 7:03:23 AM PDT by Paladin2
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To: DManA
"What is the Atlas Shrugged point?"

Not unlike inflation, everyone has their own value (including projected NPV including expected changes in marginal rates).

17 posted on 09/15/2010 7:05:34 AM PDT by Paladin2
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To: kosciusko51
Nor do they understand that there are consequences to their actions.

I'm well past ascribing that to ignorance, it's malice. The consequences they talk about arent' the consequences they want. If your sole goal is power over all others, then it's easiest done if all others are totally impoverished.

They did it before when the USSR broke up. The talk was of worry about the 'ruble overhang'. Common folks had saved up rubles, as there was not much to spend them on. So TPTB redefined the ruble to smash the savings, and so could pick up ownership of the now-privatized national wealth for pocket change.

18 posted on 09/15/2010 7:06:59 AM PDT by slowhandluke (It's hard to be cynical enough in this age.)
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To: Darteaus94025
""

Hatches, Bushes, Dingles, Pelosis(D'Alesandros), Reids, Bidens, Cuomos, McCains, Fords,...

It's a good list to start and keep in front of the Tea Party.

19 posted on 09/15/2010 7:11:23 AM PDT by Paladin2
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To: Darteaus94025
"It's simply a monarchy with several ruling families vying for control (Kennedys, Clintons, etc.) "

+ Hatches, Bushes, Dingles, Pelosis(D'Alesandros), Reids, Bidens, Cuomos, McCains, Fords,...

It's a good list to start and keep in front of the Tea Party.

20 posted on 09/15/2010 7:12:27 AM PDT by Paladin2
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To: Paladin2
No No we need to make a collective decision on this.

(just kidding)

everyone has their own value

21 posted on 09/15/2010 7:14:53 AM PDT by DManA
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To: slowhandluke; Thermalseeker
I agree that you are both right that the lib elite know what they are doing, but it is not their stated intent. My guess is that they also know that cutting taxes would stimulate the economy.

However, the lib rank and file are too ignorant to know that their leaders are lying to them about the Laffer curve. Also, the lib R&F believe that the policies of the lib elite will actually generate the consequences promised to them.

22 posted on 09/15/2010 7:15:02 AM PDT by kosciusko51
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To: SeekAndFind
The way I explain the Laffer curve is to ask the Liberal what tax revenue would be at a 100% tax rate.

Some of them actually believe that people would continue to work even if ALL of their paycheck went to the government.

23 posted on 09/15/2010 7:15:14 AM PDT by E. Pluribus Unum ("The only stable state is one in which all men are equal before the law." -- Aristotle)
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To: E. Pluribus Unum

RE: Some of them actually believe that people would continue to work even if ALL of their paycheck went to the government.


They will, but under a DIFFERENT FORM of Government. See : Castro, Fidel.


24 posted on 09/15/2010 7:16:17 AM PDT by SeekAndFind
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To: shove_it
RE: so where's the curve?
Unfortunately, Woodhill didn't show it in this article.

But here's the original Laffer Curve for those who want a review:



Here's another version :

\

If the tax rate is 0%, we get zero revenue. If the tax rate is 100%, we also get zero revenue, or near to it, because no one will work. In the middle somewhere is a maximum, labeled "Equilibrium Point" in the diagram. Perhaps it's skewed more than the figures above shows, but it's in there somewhere.
25 posted on 09/15/2010 7:20:14 AM PDT by SeekAndFind
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To: DManA

Upon furthur review, including the input of a couple of FReepers, going Galt is really a final step once one has fought the statists to a national conclusion. When the time comes to go Galt, it won’t be pretty. We have to fight now and into an indefinite future before heading to the Gulch.


26 posted on 09/15/2010 7:28:58 AM PDT by Paladin2
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To: kosciusko51
Also, the lib R&F believe that the policies of the lib elite will actually generate the consequences promised to them.

And what a testimony to the stupidity of the American Liberal that it is! For example, 40 years we've had a so-called "war on poverty". Hundreds of billions of dollars has been spent (flushed) and now, forty years later, we have a slightly higher poverty level than we did in 1965. All welfare really did was create a dependent class, but that was planned, too. They knew full well what they were doing. It was never about helping poor people rise up. It was all about keeping them down and scraping for trinkets from Uncle Sugar in exchange for votes to keep Liberals in power. Witness the demise of the black family/neighborhoods as a prime example.

Liberalism fails every time it's tried, especially for those who it is supposed to "help"......

27 posted on 09/15/2010 7:40:48 AM PDT by Thermalseeker (Stop the insanity - Flush Congress!)
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To: SeekAndFind

Liberals hate it because they don’t believe the top point in the curve i.e. 100% tax rate = $0 revenue. They are too stupid to stop working...


28 posted on 09/15/2010 7:44:31 AM PDT by Wyatt's Torch (I can explain it to you. I can't understand it for you.)
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To: SeekAndFind
I expected Woodhill to display his "curve" so we could see what he's talking about; he refers to it repeatedly in his article. The great Dr. Art Laffer’s Curve is magnificent in its simplicity.
29 posted on 09/15/2010 7:47:48 AM PDT by shove_it (have a nice day)
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To: SeekAndFind

The supporters of the curves point out things that are negative about them, namely that reducing rates a certain amount increases revenues to the government. Those curves should be used to figure out how to systematically reduce revenues to the government . Of course we should be working on eliminating all entitlements and most regulation, too. Then our government would not need half of what it spends now.


30 posted on 09/15/2010 7:51:21 AM PDT by arthurus (Read Hazlitt's "Economics In One Lesson.")
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To: SeekAndFind

bm


31 posted on 09/15/2010 9:35:15 AM PDT by Para-Ord.45
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To: DManA
" EVERY time we lower tax rates revenues increase"

I agree with you; the above statement is patently false.

32 posted on 09/15/2010 3:04:47 PM PDT by TopQuark
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To: Thermalseeker
"painful beyond endurance to think a fellow citizen would deliberately destroy our country"

What's so new? The Russians by their Communist revolution, Italians when they embraced fascism, Germans under the Nazis all enthusiastically destroyed their respective countries, all the while being convinced that they were building a better replacement. What's new?

33 posted on 09/15/2010 3:08:02 PM PDT by TopQuark
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To: TopQuark
"painful beyond endurance to think a fellow citizen would deliberately destroy our country"

What's new?

Nothing. What we are seeing to foster the demise of this country has been building for nearly 150 years. The quote you attribute to me is not mine. Therefore, I can only offer what I know to be true. When you see a post of mine that is preceded by text in italics these are the words of the poster I am commenting to and are put there for clarity and context as to what I am commenting about. Very common practice here on FR.

34 posted on 09/16/2010 5:45:03 AM PDT by Thermalseeker (Stop the insanity - Flush Congress!)
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To: Thermalseeker
Addressed erroneously, sorry.
35 posted on 09/18/2010 8:30:02 PM PDT by TopQuark
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