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December 12, 2019, 05:52:54 am
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  Economics (Moderator: Kutasoff Hedzoff)
  Laffer Curve
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Author Topic: Laffer Curve  (Read 360 times)
mileslunn
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« on: November 21, 2019, 01:35:25 am »

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.
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Sen. Dean Heller
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« Reply #1 on: November 21, 2019, 02:20:52 am »

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.
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Intell
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« Reply #2 on: November 21, 2019, 06:51:39 am »

It definetly exists, it's just that people have been using it to justify tax cuts that won't raise revenue.
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gottsu
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« Reply #3 on: November 21, 2019, 07:27:04 am »

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.
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The Invisible Hand (that suicided Jeffrey Epstein)
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« Reply #4 on: November 27, 2019, 10:42:39 am »

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

We haven't been anywhere near the Laffer curve since maybe 1982.
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Mr.Phips
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« Reply #5 on: November 27, 2019, 05:23:42 pm »

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.
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mileslunn
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« Reply #6 on: November 28, 2019, 03:12:25 pm »

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.
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Tintrlvr
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« Reply #7 on: December 03, 2019, 01:24:11 pm »

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.

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.
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Gustaf
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« Reply #8 on: December 04, 2019, 10:41:12 am »

It obviously exists. Where it is more precisely is hard to tell.
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Kingpoleon
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« Reply #9 on: December 04, 2019, 07:55:42 pm »

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.
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The Invisible Hand (that suicided Jeffrey Epstein)
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« Reply #10 on: December 10, 2019, 02:32:54 pm »

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

It is safe to say that we are no where near it.
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Gustaf
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« Reply #11 on: December 11, 2019, 07:59:53 am »

The US isn't, no.
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It's Trotsky Time
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« Reply #12 on: Today at 12:45:03 am »

more like the laugher curve
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