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A primer on the Laffer curve for both left and right

What the author said....
This is what you said:

This isn’t just an example of the Laffer Curve. It’s the Laffer Curve on steroids and it’s one of those rare examples of a tax cut paying for itself.

In other words, you failed to listen to your own advice. You also...

• Failed to acknowledge that tax revenues dropped for several years after Reagan's first big tax cut
• Failed to cite your source
• Failed to acknowledge that Reagan had to raise taxes multiple times, because revenues were falling too short
• Failed to acknowledge that economists do not, in fact, see Reagan's policies as proof of the Laffer Curve
• Failed to acknowledge numerous other examples, including Louisiana, Bush 43, and now Trump -- where claims about the Laffer Curve failed to work
• Ignored how Reagan, Bush 41, Bush 43, and now Trump all increased spending while cutting taxes

Try to pay attention next time.

Oh, and a bonus point! You've made no recognition of how Clinton and Obama both raised taxes, and revenues increased anyway. How is that possible, if the Laffer Curve has an influence when the effective tax rate is in the ~25-35% range...?
 
Thit
• Failed to acknowledge that economists do not, in fact, see Reagan's policies as proof of the Laffer Curve
• Fa.?

I think you forgot the all-important qualifier.

• Failed to acknowledge that LEFT WING economists do not, in fact, see Reagan's policies as proof of the Laffer Curve.

There, fixed.
 
That is NOT what Laffer says.

Laffer says that it almost always works. That's why he accepted a $75,000 payment from the state of Kansas to help them craft their tax cuts, even though Kansas state taxes were already fairly low.

Most economists, again, say that there might be that effect when taxes are very high -- e.g. 70% rate. That isn't "70% top marginal tax rate," it means "the government is taking 70% of your income."

Again you're relying on LEFT WING economists.
That 70 % figure is just a wild ass guess.
 
I think you forgot the all-important qualifier.

• Failed to acknowledge that LEFT WING economists do not, in fact, see Reagan's policies as proof of the Laffer Curve.
Nope, wrong.

Economists of a variety of perspectives recognize that Laffer's claims do not apply to the vast majority of situations. It is only a tiny handful of economists who agree with Laffer.
 
Again you're relying on LEFT WING economists.
That 70 % figure is just a wild ass guess.
And again, wrong. Economists have actually done some work to try and figure it out. And again, there are lots of conservative economists (like Greg Mankiw, whom you've probably never heard of before) who put the optimal curve in the 60% range. The only ones still defending Laffer in any way at this point are extreme partisan think tanks like Heritage and Cato.

And again! you have:

• Failed to acknowledge that tax revenues dropped for several years after Reagan's first big tax cut
• Failed to cite your source for the tax figures
• Failed to acknowledge that Reagan had to raise taxes multiple times, because revenues were falling too short
• Failed to acknowledge that economists on the left AND RIGHT do not, in fact, see Reagan's policies as proof of the Laffer Curve
• Failed to acknowledge numerous other examples, including Louisiana, Bush 43, and now Trump -- where claims about the Laffer Curve failed to work
• Ignored how Reagan, Bush 41, Bush 43, and now Trump all increased spending while cutting taxes
• Failed to explain how tax revenues went up after Reagan, Clinton and Obama increased taxes

By the way, I find it rather hilarious that you display your own partisanship primarily by accusing others of being partisan. Oh, the irony...
 
And again, wrong. Economists have actually done some work to try and figure it out. And again, there are lots of conservative economists (like Greg Mankiw, whom you've probably never heard of before) who put the optimal curve in the 60% range. The only ones still defending Laffer in any way at this point are extreme partisan think tanks like Heritage and Cato.
.

You just contradicted your self- You said the only ones defending it are extremists, yet you just showed where Mankiw sort of did defend it.

And by the way , because of this stupid internet thing, people can catch liberal partisans like you bending the truth to fit your narrative.

Greg Mankiw, Robert M. Beren professor of economics, Harvard University; former chairman, Council of Economic Advisors:

"My guess is that that the short-run answer and the long-run answer are quite different. For example, if you raised the top rate from 35 to, say, 60 percent, you might raise revenue in the short run. Over time, however, you would get lower economic growth, so the additional revenues would fall off and eventually decline below what they would have been at the lower rate.... I will pass on offering a specific number, as it would require more time and thought than I can offer just now, but I will opine that I think the long-run answer is actually more important for policy purposes than the short-run answer."

A far cry from what you said, eh?:spin:

and just as I said. LEFTIES put it at 70.

http://voices.washingtonpost.com/ezra-klein/2010/08/where_does_the_laffer_curve_be.html

Some interesting and thoughtful answers for those with an open mind! Especially Feldstein's
 
And again

• Failed to acknowledge that tax revenues dropped for several years after Reagan's first big tax cut

• Failed to acknowledge that Reagan had to raise taxes multiple times, because revenues were falling too short

..
Boy I'm really failing there aren't I?? LAFFRIOT.
The first argument is silly.
Everybody recognizes the true effects of a tax raise or hike are longer term than a few years.

It's fun to look at academic studies but they are always severly limited by their nature.

Some times you have to use common sense.
A now a guy who owns a small restaurant. He's thinking of opening a new one, hiring maybe 10 people.
Lets' say he makes 100 k a year. Lets say the cureent tax rate on earnings over 100 k is 50%.

If the rate were to drop to 35% would he be :
-more likely to take that risk and put in that extra effort
-less likely to take that risk and put in that extra effort
- indifferent
 
Yeah, OK. Try looking in a mirror.

Among economists, this is not a partisan issue. The overwhelming majority of economists, from pretty much all political positions and ideologies, know that the Laffer Curve does not work (or, to be more specific, only comes into play when effective tax rates hit the 70% range). The Laffer Curve epically failed during the Reagan years, during Bush 43's term, UK in 2013, in Louisiana under Jindal, and now with Trump. Kansas is just a glaring example, as Laffer himself helped design the cuts, and who promoted the cuts as generating a surplus... eventually.

This is only a "partisan" issue in the sense that a partisan dedication to tax cuts has pushed many (not all) conservatives into the highly irrational claim that "tax cuts pay for themselves!" despite the abundant evidence to the contrary.



lol

I hate to break this to you, but: Conservatives has proclaimed, for years and years, that tax cuts are the panacea that work every time, under all conditions. If the economy is up? Cut taxes. We're in a recession? Cut taxes. Unemployment is high? Cut taxes. Unemployment is at record lows? Cut taxes. Were you not paying attention?

Your generalizations on what the Laffer curve does and does not proclaim indicate you have a political bias against tax cuts and attempt to discredit the proof or at least twist its meaning into something other than what it clearly indicates. Your mistake lies in failing to account for all the effects of what you profess. When you take into account all the effects you find it does "pay for itself" as it must.

Furthermore, your statement the Laffer curve, "only comes into play when effective tax rates hit 70%" should be an embarrassment to you. It shows either no reasoning ability or a veil attempt to obfuscate the truth. The mathematical proof is not based on a mathematical equation resulting in a certitude which can even begin to be used to derive such a number. It therefore makes no attempt to do so and anyone who derives such ridiculous and meaningless "economic statistics" indicates no understanding of the subject whatsoever. Would you also state in kind that the law of Supply and Demand only comes into play when the cost of Supply is below 70% of the price?

Even the most liberal of studies indicate the peak (which isn't to be confused with the optimum rate) is less than 27%. Most studies show the median value around 15% to 17%. 70% is just laughable it is so far outside all studies and therefore this is something you or someone else pulled out of an orifice of some kind. The "Laffer Curve" applies for all values of effective taxation from 0% to 100% as it is a curve defined upon that domain.
 
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One of the concepts I've struggled with in dealing with tax rate reductions is the question of whether "they pay for themselves". What exactly does that mean? Assuming lowered rates produce some degree of increased economic activity that leads to increased revenue, is the assumption that the increased activity would have happened anyway and generated more review because it would be taxed at the old, higher rate? Doesn't that suggest that tax policy doesn't effect economic activity? Am I missing something here?
 
Just a data point, granted from a conservative site.


There is a distinct pattern throughout American history: When tax rates are reduced, the economy's growth rate improves and living standards increase. Good tax policy has a number of interesting side effects. For instance, history tells us that tax revenues grow and "rich" taxpayers pay more tax when marginal tax rates are slashed. This means lower income citizens bear a lower share of the tax burden - a consequence that should lead class-warfare politicians to support lower tax rates.
Conversely, periods of higher tax rates are associated with sub par economic performance and stagnant tax revenues. In other words, when politicians attempt to "soak the rich," the rest of us take a bath. Examining the three major United States episodes of tax rate reductions can prove useful lessons.
 
Having worked on this issue for decades, I can state with great confidence that there are two groups that make my job difficult:

The folks who don’t like pro-growth tax policy and thus claim that changes in tax policy have no impact on the economy
The folks who do like pro-growth tax policy and thus claim that every tax cut will “pay for itself” because of faster growth

or all intents and purposes, I’m Goldilocks in the debate over the Laffer Curve. Except instead of stating that the porridge is too hot or too cold, my message is that changes in tax policy generally lead to more taxable income, but the growth in income is usually not enough to offset the impact of lower tax rates.

In other words, some revenue feedback but not 100 percent revenue feedback.

https://fee.org/articles/the-laffer...-right-understand-this-basic-economic-theory/

That really isn't an accurate description of the Laffer Curve. Both sides get it wrong.
 
Having worked on this issue for decades, I can state with great confidence that there are two groups that make my job difficult:

The folks who don’t like pro-growth tax policy and thus claim that changes in tax policy have no impact on the economy
The folks who do like pro-growth tax policy and thus claim that every tax cut will “pay for itself” because of faster growth

or all intents and purposes, I’m Goldilocks in the debate over the Laffer Curve. Except instead of stating that the porridge is too hot or too cold, my message is that changes in tax policy generally lead to more taxable income, but the growth in income is usually not enough to offset the impact of lower tax rates.

In other words, some revenue feedback but not 100 percent revenue feedback.

https://fee.org/articles/the-laffer...-right-understand-this-basic-economic-theory/


The Laffer Curve is a theory where in the two end points are demonstrably true, and the rest of the curve is completely unknown.

It is a theory that proposes that an omniscient government can maximize taxation and economic growth. But lacking an omniscient government all we can all do is argue over the infinite potential curves of the given moment.
 
what's wrong with it?

The Laffer curve shows that if the tax rates are too high, then lowering the tax rates will bring in more revenue. If the tax rates are just right or too low, lowering the tax rates will bring in less revenue. The right doesn't understand that if the tax rates are already good or too low, lowering the rates will bring in less revenue and the left does not understand that if the tax rates are indeed too high then lowering the tax rates will bring in more revenue. But, the hard part is in determining where you actually are on the curve, which can be notoriously hard to do. There are also a lot of variables involved but the Laffer curve is exactly correct when you look at it after the fact, much like the weatherman can tell you exactly why something happened after it already happened.
 
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