Why can't we go back to the Eisenhower tax code? (user search)
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  Why can't we go back to the Eisenhower tax code? (search mode)
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Author Topic: Why can't we go back to the Eisenhower tax code?  (Read 6366 times)
Gustaf
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« on: December 07, 2016, 12:08:55 PM »

Basically, all countries used to have super-high top marginal tax rates and then all countries scrapped them once we figured out it actually decreases revenue through incentive effects.

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Gustaf
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Posts: 29,779


Political Matrix
E: 0.39, S: -0.70

« Reply #1 on: January 29, 2017, 12:52:58 PM »

Basically, all countries used to have super-high top marginal tax rates and then all countries scrapped them once we figured out it actually decreases revenue through incentive effects.



The Laffer curve has been pretty discredited over the last few decades.

The countries that scaled back income tax rates in the 80s all saw substantial declines in income tax revenue (that of tens had to be recouped through regressive taxes like VAT). Furthermore, there is no clear link between reductions to the top rate of tax and economic growth rates post 1975.

The Laffer curve is not discredited, it's almost trivially true. What may have been discredited is the exact shape of the Laffer curve assumed as a justification for specific tax cuts.

The tax cuts in the 80s in e.g. the US were pretty dramatic and not just about the top marginal tax rate. Most studies I've seen in recent years indicate the inefficiency of rates at those levels. Simple cross-country regressions aren't great tools for analyzing any economic policy.
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