Talk Elections

Do people here believe the Laffer curve actually applies in real world whereby after you increase tax rates above a certain point you lose more revenue than gain.  And if so at what rate do you believe the peak is around.  I believe the peak is around 45%, but it depends a lot on elasticity of income, ability to move elsewhere so in some jurisdictions it is higher, others it is lower.

Yes, it exists and it's a real thing, and there's not always a defineable peak because a lot of it comes from different factors. For instance, economic growth caused by returning money to the hands of private investors vs being able to raise more money just from "natural" taxation.

It definetly exists, it's just that people have been using it to justify tax cuts that won't raise revenue.

First of all, economy is a social, and not a hard science, so it's all a little blurry and abstract when we talk about things like Laffer Curve.

All depends in my opinion. All the economic and non-economic factors are playing the role.

We haven't been anywhere near the Laffer curve since maybe 1982.

Whether he wants to acknowledge it or not, Laffer originally had the peak at 50%, which not coincidentally was the top rate after the first Reagan tax cuts in 1981.

That sounds reasonable.  At the moment Israel and Slovenia have top rates exactly at that, while elsewhere in OECD, most Western European countries at least as well as Israel, Australia, South Korea, and Canada are either slightly below or slightly above that.  I would say the peak though is around 45%.  That would mean high tax states like New York and California when you combine federal and state are close to peak while in Canada where I live, Western provinces would be near it, but Eastern ones above it.  Of G7, US mostly below, Canada close to it but slightly above depending on province; italy, UK, and Germany just below but at least have fiscal room to raise it a bit if they need to, while Japan and France would clearly be on the wrong side.  Off course in case of Japan, mobility due to language barrier is much more limited so they can probably put theirs higher than other G7 countries without as large an out migration.

Funny how the ideal top rate just kept dropping to whatever top rate the Republicans were proposing at the time!

There probably is an ideal top marginal rate for generating revenue ... but it's also probably somewhere around 80+%, making the whole concept of the Laffer Curve meaningless. Laffer never made any attempt to prove otherwise, relying solely on the intuition that very high rates would discourage additional income seeking.

It obviously exists. Where it is more precisely is hard to tell.

It kind of works, but when you cut corporate taxes from 30% to 20%, company revenue would have to double to make up the difference in taxes.

It is safe to say that we are no where near it.

The US isn't, no.

more like the laugher curve

Well, it doesn't take a degree in economics to understand that if the tax rate is near 0% or near 100%, the revenue of taxation must be very small, so the top revenue must be somewhere between - and it also makes sense that the revenue as a function of the tax percentage (if you can talk about this) is a (somewhat) continous curve, so the Laffer curve exists - but this observation is rather trivial and does not justify the tax cuts that have been made in the name of the Laffer curve.

If it had validity it would have expression in econometric analysis that measures it and case studies to back it up. The economic profession seems not to take it seriously.

It is more an ideological assertion than a documented relationship between taxes and economic activity. Taxes would have to be at punitive levels along with a failure to return public benefits to those from whom the taxes are taken. One can argue that the super-rich have more to defend: "American interests abroad", meaning their corporate investments overseas from revolutionary regimes that would confiscate American investments in the name of socialism.

Government spending goes back into the economy as private revenues. If the government is spending revenue on education it is ideally making students more likely to become high-income earners. If it spends funds on highways then what construction companies get is income that buys building materials and pays construction workers.     

Not since Calvin Coolidge was in the White House have revenues gone up when income taxes went down.

It exists because there is a fact such as "at point in time t1 the maximizing tax rate would have been X" but it's highly contextual (that X could change within the same day) and it appears to be from the standpoint of epistemology inaccessible to us

That has much more to do with our spending habits ... there is plenty of evidence that reduced taxes lead to increased consumption and economic stimulation.

Which is a really, really stupid assumption that brings his overall judgment into question. If there does exist a point where having more money is somehow worse than having less money, additional taxes would have nothing to do with it.

Only if you operate on the really, really, really, stupid assumption that only money has value. The Laffer curve is based upon the sound economic principle that time has value. If you reduce the monetary reward for spending time pursuing certain activities, you reduce the demand for them because time is the one commodity that everyone has an equal income in, earning twenty-four hours each day. The Laffer Curve is real, the tricky part is trying to determine where we are on the curve. Based on real world experience, it doesn't appear that we're on the part of the curve, where reducing tax rates would stimulate a sufficient increase in economic activity that tax revenue would be increased as a result.

That only works if income is based on time. Obviously, it isn't.

So you're saying that there's no point to the eight hour workday?

Ultimately money is just an abstraction that lets people efficiently trade time (in the form of what people produce or otherwise obtain during that time). Even if you are simply investing money to earn interest or dividends, the resulting income comes from others using that money to enable them to take the time to figure out and then actually produce a good or service that others want.

The only problem with the Marxian labor theory of value is when it oversimplifies and treats all labor as being of equal value. As Adam Smith wrote:

George Bernard Shaw believed that all labor should be of equal value.

That and a nickel will get you a five-cent cigar.

If I'm hungry for an apple pie, it doesn't matter if you're the world's best maker of mud pies. Your labor in making a mud pie is of no value to me.

It's a nice utopian idea that all labor should be of equal value, but that's not the real world, and never could be.

I didn't say it was, but he makes some good arguments in his book The Intelligent Woman's Guide to Socialism, Capitalism (and whatever else, the two editions have different titles.)

Could it be desirable that more people go into entrepreneurial efforts? Inheritor classes are rarely the ones to start new businesses unless those are near-hobbies or vanity projects. So you are flush with cash and start a winery, or you start a 'book publisher' that offers books praising your religious or political values. Big deal!

In view of the death of the department store, I miss the small-town clothing stores that include the JC Penney stores that got closed so that they would not 'cannibalize' the revenue of mall anchors. A small-town version could hire plenty of workers with low education and no obvious skills. In minority-majority areas such stores could better fit local needs. Clothing designed for Caucasians usually fits Asians (except southwest Asians) badly, and some styles that look good on white people are disasters on blacks. JC Penney used to be three miles away from me in a town of 10,000 people... and then forty miles away in a city of 40,000... and it is now seventy miles away in a city of population 250,000+.

3-D printing can be much more responsive to customer needs than is manufacturing for a mass market. Mass markets are likely to disappear with greater prosperity.  It has the benefit of not producing excess stuff that typically ends up being sold at a huge discount as seconds and overruns.

America has all the class privilege that it needs -- and really has an over-run. We need more capitalists and more capitalism, and not further bloat of corporate behemoths with bureaucratic narcissists paid well for treating others badly while kissing up to shareholders. The idea behind the Laffer Curve is that the key to prosperity is to ensure that those already get rich get even richer while closing off opportunities to others.