The Laffer Curve

[sawdust]

Through the years many liberals have told me how wrong the concept behind the Laffer Curve is. I could never understand why they thought it was wrong.




Please watch the video and tell me what doesn't make sense.

Thanks in advance.

 

[longview]

From an economic standpoint everything he says looks correct.
From a political standpoint He may be off on what left wingers want.
Yes they want bigger government, but they also seem to want to punish success.
Success creates differences in outcome, an in the liberal mind,
that is unfair, and should be punished.

 

[jaeger19]

Just to point out.. many people don't understand the Laffer Curve...

Less taxes does not mean more revenue in the Laffer curve. Its a CURVE..

At zero taxes.. you have no revenue.. and your revenue goes UP as YOU TAX MORE.. so in half the curve.. the MORE you tax, the more revenue you make.

At a "sweet spot" taxes reach a level that maximizes revenue...

After that spot.. as taxes go up.. revenue goes down as folks avoid taxes, or slow down business etc.. until you reach a bottom where Taxes are so high (100%) that there is no incentive for production and thus no revenue.

 

[MTAtech]

The theory that lower taxes yields higher revenue has been discredited by history.

These two graphs illustrate the problem with the Bush tax-cuts. Even though GDP rose federal revenue dropped:

It should be obvious to anyone. After each Bush tax-cut, even though GDP rose, revenue dropped. However, some will deny reality because it's more soothing to deny the facts than challenge the validity of their ideology.

"Lowering taxes increases revenues:" There is no empirical evidence that the claim is true and plenty of evidence that the claim is false.

Not even Mitch McConnell makes that claim. McConnell said, there is "No evidence whatsoever that the Bush tax cuts actually diminished revenue." He wasn't saying it increased it; he said it didn't diminish it. But even that's wrong.

When the tax-cuts were passed, the CBO estimated that the 2001 tax-cut:
"would decrease governmental receipts by $70 billion in 2001, by $512 billion over the 2001-2006 period, and by $1.26 trillion over the 2001-2011 period";

AND:

"The Joint Committee on Taxation (JCT) and CBO estimate that H.R. 2 [the Jobs and Growth Tax Relief Reconciliation Act of 2003] would increase budget deficits by $60.8 billion in 2003, by $342.9 billion over the 2003-2008 period, and by $349.7 billion over the 2003-2013 period. "

The Congressional Budget Office said:

The new CBO data show that changes in law enacted since January 2001 increased the deficit by $539 billion in 2005. In the absence of such legislation, the nation would have a surplus this year [2005]. Tax cuts account for almost half — 48 percent — of this $539 billion in increased costs.

How about the Committee for a Responsible Federal Budget? Their budget calculator shows that the tax cuts will cost $3.28 trillion between 2011 and 2018.

How about George W. Bush's CEA chair, Greg Mankiw, who used the term "charlatans and cranks" for people who believed that "broad-based income tax cuts would have such large supply-side effects that the tax cuts would raise tax revenue." He continued: "I did not find such a claim credible, based on the available evidence. I never have, and I still don't."

The bottom-line is that the Bush tax-cuts cut revenue: In 2000, federal tax revenues were $2,025.46 billion, nominal GDP was $9,951.5 billion. In 2003, these amounts were $1,782.53 billion and $11,142.1 billion. In other words, GDP rose 12% and federal revenues fell 12%.

Federal revenues eventually rose, to take out the 2000 peak in 2005 (2007 in real terms,) but this doesn't mean much. Revenues eventually catch up due to GDP growth and population growth regardless of policy. The economy grows 4-6% most years, unadjusted for inflation, so naturally the general trend of taxes is to rise about 4-6% each year. Being unable to return to a previous peak for five years, despite this built in trend strongly suggests tax cuts reduced revenue, ceteris parabus.

 

[MTAtech]

Just to point out.. many people don't understand the Laffer Curve...

Less taxes does not mean more revenue in the Laffer curve. Its a CURVE..

At zero taxes.. you have no revenue.. and your revenue goes UP as YOU TAX MORE.. so in half the curve.. the MORE you tax, the more revenue you make.

At a "sweet spot" taxes reach a level that maximizes revenue...

After that spot.. as taxes go up.. revenue goes down as folks avoid taxes, or slow down business etc.. until you reach a bottom where Taxes are so high (100%) that there is no incentive for production and thus no revenue.

There is no evidence that taxes lower than confiscatory rates raise more revenue.

This is a good read: A review of the economic research on the effects of raising ordinary income tax rates

 

[jaeger19]

The theory that lower taxes yields higher revenue has been discredited by history.

These two graphs illustrate the problem with the Bush tax-cuts. Even though GDP rose federal revenue dropped:

It should be obvious to anyone. After each Bush tax-cut, even though GDP rose, revenue dropped. However, some will deny reality because it's more soothing to deny the facts than challenge the validity of their ideology.

"Lowering taxes increases revenues:" There is no empirical evidence that the claim is true and plenty of evidence that the claim is false.

Not even Mitch McConnell makes that claim. McConnell said, there is "No evidence whatsoever that the Bush tax cuts actually diminished revenue." He wasn't saying it increased it; he said it didn't diminish it. But even that's wrong.

When the tax-cuts were passed, the CBO estimated that the 2001 tax-cut:
"would decrease governmental receipts by $70 billion in 2001, by $512 billion over the 2001-2006 period, and by $1.26 trillion over the 2001-2011 period";

AND:

"The Joint Committee on Taxation (JCT) and CBO estimate that H.R. 2 [the Jobs and Growth Tax Relief Reconciliation Act of 2003] would increase budget deficits by $60.8 billion in 2003, by $342.9 billion over the 2003-2008 period, and by $349.7 billion over the 2003-2013 period. "

The Congressional Budget Office said:



How about the Committee for a Responsible Federal Budget? Their budget calculator shows that the tax cuts will cost $3.28 trillion between 2011 and 2018.

How about George W. Bush's CEA chair, Greg Mankiw, who used the term "charlatans and cranks" for people who believed that "broad-based income tax cuts would have such large supply-side effects that the tax cuts would raise tax revenue." He continued: "I did not find such a claim credible, based on the available evidence. I never have, and I still don't."

The bottom-line is that the Bush tax-cuts cut revenue: In 2000, federal tax revenues were $2,025.46 billion, nominal GDP was $9,951.5 billion. In 2003, these amounts were $1,782.53 billion and $11,142.1 billion. In other words, GDP rose 12% and federal revenues fell 12%.

Federal revenues eventually rose, to take out the 2000 peak in 2005 (2007 in real terms,) but this doesn't mean much. Revenues eventually catch up due to GDP growth and population growth regardless of policy. The economy grows 4-6% most years, unadjusted for inflation, so naturally the general trend of taxes is to rise about 4-6% each year. Being unable to return to a previous peak for five years, despite this built in trend strongly suggests tax cuts reduced revenue, ceteris parabus.

Tell me.. what do you think GDP would be if we taxed all revenue at 100%? Do you think that countries would flee America to go to countries with lower taxes if we taxed revenue 100%.

If GDP dropped.. would not revenue drop?

Please answer that.

 

[jaeger19]

The theory that lower taxes yields higher revenue has been discredited by history.

These two graphs illustrate the problem with the Bush tax-cuts. Even though GDP rose federal revenue dropped:

It should be obvious to anyone. After each Bush tax-cut, even though GDP rose, revenue dropped. However, some will deny reality because it's more soothing to deny the facts than challenge the validity of their ideology.

"Lowering taxes increases revenues:" There is no empirical evidence that the claim is true and plenty of evidence that the claim is false.

Not even Mitch McConnell makes that claim. McConnell said, there is "No evidence whatsoever that the Bush tax cuts actually diminished revenue." He wasn't saying it increased it; he said it didn't diminish it. But even that's wrong.

When the tax-cuts were passed, the CBO estimated that the 2001 tax-cut:
"would decrease governmental receipts by $70 billion in 2001, by $512 billion over the 2001-2006 period, and by $1.26 trillion over the 2001-2011 period";

AND:

"The Joint Committee on Taxation (JCT) and CBO estimate that H.R. 2 [the Jobs and Growth Tax Relief Reconciliation Act of 2003] would increase budget deficits by $60.8 billion in 2003, by $342.9 billion over the 2003-2008 period, and by $349.7 billion over the 2003-2013 period. "

The Congressional Budget Office said:



How about the Committee for a Responsible Federal Budget? Their budget calculator shows that the tax cuts will cost $3.28 trillion between 2011 and 2018.

How about George W. Bush's CEA chair, Greg Mankiw, who used the term "charlatans and cranks" for people who believed that "broad-based income tax cuts would have such large supply-side effects that the tax cuts would raise tax revenue." He continued: "I did not find such a claim credible, based on the available evidence. I never have, and I still don't."

The bottom-line is that the Bush tax-cuts cut revenue: In 2000, federal tax revenues were $2,025.46 billion, nominal GDP was $9,951.5 billion. In 2003, these amounts were $1,782.53 billion and $11,142.1 billion. In other words, GDP rose 12% and federal revenues fell 12%.

Federal revenues eventually rose, to take out the 2000 peak in 2005 (2007 in real terms,) but this doesn't mean much. Revenues eventually catch up due to GDP growth and population growth regardless of policy. The economy grows 4-6% most years, unadjusted for inflation, so naturally the general trend of taxes is to rise about 4-6% each year. Being unable to return to a previous peak for five years, despite this built in trend strongly suggests tax cuts reduced revenue, ceteris parabus.

Tell me.. what do you think GDP would be if we taxed all revenue at 100%? Do you think that countries would flee America to go to countries with lower taxes if we taxed profit 100%.

If GDP dropped.. would not revenue drop?

Please answer that.

 

[iliveonramen]

Actually you're right that Liberals don't agree with the "Laffer Curve"....they do agree there is a relationship between very high tax rates and tax revenue and very low tax rates and tax revenue. The idea that it looks like a curve Laffer drew on a cocktail napkin based on no research is just ridiculous. In fact the Romer study actually found that you could actually tax the wealthy a much higher rates than 33% or even the 35% before you start seeing declines in tax revenue.

 

[MTAtech]

From an economic standpoint everything he says looks correct.
From a political standpoint He may be off on what left wingers want.
Yes they want bigger government, but they also seem to want to punish success.
Success creates differences in outcome, an in the liberal mind,
that is unfair, and should be punished.

No, that's another example of mirror thinking. Conservatives want smaller government, per se, so they think liberals must want bigger government for the sake of bigger government. No, liberals want government to do things, such as provide a safety net and affordable health care. The size of government isn't a goal of liberals.

 

[jaeger19]

There is no evidence that taxes lower than confiscatory rates raise more revenue.

This is a good read: A review of the economic research on the effects of raising ordinary income tax rates

I think good old common sense is all that's necessary here.

Lets say you taxed the crap out of the poor and middle class and decreased their disposable income... do you think that might have an effect on GDP?

Tell me.. you why do you want to increase taxes on the poor and middle class? Do you really think that's what the economy needs right now.. is to decrease the disposable income my customers have? Do you really think forcing my customers to buy cheaper foreign made goods is better for America revenue

 

[iangb]

The Laffer curve is fine, as a gross oversimplification. The location of the 'Hump' as discussed in the video is not, nor is interpreting the Laffer curve to relate to a real and graduted/progressive taxation system, and especially nor is combining the previous two.

Firstly, the oversimplification. Progressive taxation systems (eg 0% on the first $ earned, 10% on the second, etc - not that that's an example of a real-world system!) are quite different from flat rate ones. To take an extreme example, if there was 0% tax on your first $100,000 a year and then 100% on all earning above this, everyone would have the incentive to work all the way up until they earned $100,000 a year and then no futher. That simply doesn't fall on the Laffer curve - just at it's purest, what percentage tax would you compare to the line?

Secondly, the 'hump' location. I had a look at the paper that the Youtube video cites, and it contains zero examples of either the "Laffer curve" or even "33" (the video claims it sets the 'hump' at 33%). Given that the paper is about the real world, not the flat-tax-theory-world which the Laffer curve describes, this really isn't too suprising that it's not discussed.

All in all, the Laffer curve is an oversimplification which is not applicable to real-world taxation systems and the 'hump' of which is almost certainly not 33%.

 

[MTAtech]

Actually you're right that Liberals don't agree with the "Laffer Curve"....they do agree there is a relationship between very high tax rates and tax revenue and very low tax rates and tax revenue. The idea that it looks like a curve Laffer drew on a cocktail napkin based on no research is just ridiculous. In fact the Romer study actually found that you could actually tax the wealthy a much higher rates than 33% or even the 35% before you start seeing declines in tax revenue.

Tell me.. what do you think GDP would be if we taxed all revenue at 100%? Do you think that countries would flee America to go to countries with lower taxes if we taxed revenue 100%.

If GDP dropped.. would not revenue drop?

Please answer that.

That's an example of reductio ad absurdum, carrying an argument to the absurd.

If lowering taxes yields more revenue, what would revenue be if we lowered tax-rates to zero?

I think you should read what I posted earlier -- A review of the economic research on the effects of raising ordinary income tax rates: Higher revenue, unchanged growth, and uncertain but potentially large reductions in the growth of inequality | Economic Policy Institute
According to the research, the optimal top rate lies between 73%, (Diamond and Saez) and 80% (Romer and Romer.)

 

[KLATTU]

That's an example of reductio ad absurdum, carrying an argument to the absurd.
If lowering taxes yields more revenue, what would revenue be if we lowered tax-rates to zero?
.)

Of course NONE of this left wing gibberish even addresses the OP. The OP merely theorizes there is some point at which an increase in tax rates does not equal an increase in revenue.And that there is some point at which a lower tax rate would actually result
in higher revenues. Nowhere , ever, never, ever did LAffer state , out of context , that lower taxes increase revenues.

 

[sawdust]

The theory that lower taxes yields higher revenue has been discredited by history.

These two graphs illustrate the problem with the Bush tax-cuts. Even though GDP rose federal revenue dropped:

It should be obvious to anyone. After each Bush tax-cut, even though GDP rose, revenue dropped. However, some will deny reality because it's more soothing to deny the facts than challenge the validity of their ideology.

"Lowering taxes increases revenues:" There is no empirical evidence that the claim is true and plenty of evidence that the claim is false.

Not even Mitch McConnell makes that claim. McConnell said, there is "No evidence whatsoever that the Bush tax cuts actually diminished revenue." He wasn't saying it increased it; he said it didn't diminish it. But even that's wrong.

When the tax-cuts were passed, the CBO estimated that the 2001 tax-cut:
"would decrease governmental receipts by $70 billion in 2001, by $512 billion over the 2001-2006 period, and by $1.26 trillion over the 2001-2011 period";

AND:

"The Joint Committee on Taxation (JCT) and CBO estimate that H.R. 2 [the Jobs and Growth Tax Relief Reconciliation Act of 2003] would increase budget deficits by $60.8 billion in 2003, by $342.9 billion over the 2003-2008 period, and by $349.7 billion over the 2003-2013 period. "

The Congressional Budget Office said:



How about the Committee for a Responsible Federal Budget? Their budget calculator shows that the tax cuts will cost $3.28 trillion between 2011 and 2018.

How about George W. Bush's CEA chair, Greg Mankiw, who used the term "charlatans and cranks" for people who believed that "broad-based income tax cuts would have such large supply-side effects that the tax cuts would raise tax revenue." He continued: "I did not find such a claim credible, based on the available evidence. I never have, and I still don't."

The bottom-line is that the Bush tax-cuts cut revenue: In 2000, federal tax revenues were $2,025.46 billion, nominal GDP was $9,951.5 billion. In 2003, these amounts were $1,782.53 billion and $11,142.1 billion. In other words, GDP rose 12% and federal revenues fell 12%.

Federal revenues eventually rose, to take out the 2000 peak in 2005 (2007 in real terms,) but this doesn't mean much. Revenues eventually catch up due to GDP growth and population growth regardless of policy. The economy grows 4-6% most years, unadjusted for inflation, so naturally the general trend of taxes is to rise about 4-6% each year. Being unable to return to a previous peak for five years, despite this built in trend strongly suggests tax cuts reduced revenue, ceteris parabus.

The Laffer curve doesn't say that lower taxes means more revenue. Watch the video. The Laffer curve suggests that there is a point of diminishing returns were tax rates become too high and taxes stifle economic growth. You are looking at this emotionally I believe.

 

[MTAtech]

The Laffer curve doesn't say that lower taxes means more revenue. Watch the video. The Laffer curve suggests that there is a point of diminishing returns were tax rates become too high and taxes stifle economic growth. You are looking at this emotionally I believe.

That is true but it is not 33% -- or else there wouldn't have been a drop in revenue when Reagan and then Bush lowered taxes. According to the above research, the optimal marginal rate is between 73 and 80%.

This was real GDP growth during the 1950s to 2008. During that period there were lots of different top marginal rates -- from 90%, to 70%, to 50% to 39% to 35%. Notice where the periods of low taxation are? Neither do I.

 

[sawdust]

That is true but it is not 33% -- or else there wouldn't have been a drop in revenue when Reagan and then Bush lowered taxes. According to the above research, the optimal marginal rate is between 73 and 80%.

This was real GDP growth during the 1950s to 2008. During that period there were lots of different top marginal rates -- from 90%, to 70%, to 50% to 39% to 35%. Notice where the periods of low taxation are? Neither do I.

You can't just look at marginal rates. That's one issue I have with the Laffer curve. I believe that effective rates take into account tax policy, which is as important as marginal rates. Under Eisenhower the top marginal rate was 90%. Nobody paid it because the tax code was full of loopholes, deductions, dodges and mechanisms that people used so that they weren't punished with such a high rate. Kennedy lowered marginal rates, increased revenue but he also closed lots of loopholes in the code. Reagan lowered rates and eliminated the three martini lunch among other deductions after which the Democrats took advantage of the recovery from the Carter years and incrementally raised rates during his administration.

Taxes are complicated. You can't look at one rate at a specific time and determine what corollary there was between rate and revenue. Clinton served during the dot com bubble. The economy was booming. He raised rates and revenue exploded. Why did the revenue explode? I suspect it was the growth of the internet in the 90's and the economic activity it created. I'm sure increased taxes had something to do with it but a strong economy can withstand tax increases. Weak economies can't which is why every administration lowers taxes in a recession.

Any discussion about tax rates is useless without including overall tax policy.

 

[jaeger19]

That's an example of reductio ad absurdum, carrying an argument to the absurd.

If lowering taxes yields more revenue, what would revenue be if we lowered tax-rates to zero?

I think you should read what I posted earlier -- A review of the economic research on the effects of raising ordinary income tax rates: Higher revenue, unchanged growth, and uncertain but potentially large reductions in the growth of inequality | Economic Policy Institute
According to the research, the optimal top rate lies between 73%, (Diamond and Saez) and 80% (Romer and Romer.)

No.. its using logic..

The mantra that some in my party use that "lower taxes equals higher revenue".. is obviously not true because at some point.. taxes are so low that revenue is hurt..

BUT you don't seem to realize that YOUR liberal mantra of "higher taxes means higher revenue"... is also obviously not true because at some point.. taxes are so high that GDP is hurt and folks work to avoid those taxes...

Your economic research is absolutely flawed in that "optimal rates" being 73% and 80% or whatever is a bunch of BS.. because those are NOT effective tax rates. That's why rates are an absolutely a poor indicator of the effective of taxes. Because its not the effective tax rate.

Technically Romney is "supposed" to pay 39% right? Because he is so rich... but he pays close to 12%... because of the deductions and credits and being allowed to used capital gains.

You could raise Romneys earned income rate to 90% and you now how much his effective tax rate will change? Hardly noticeable.

That's a fact that liberals don't seem to get in your mantra... You rave about the high taxes of the 1940's and 1950's. Great.. and then go and look at the real indicator of just how much tax you are actually collecting which is measured by the percentage of GDP taxed. And you know what you find.. high marginal taxes and low marginal taxes and the actual rate of taxation per GDP stays right around 18.5%.

 

[vash1012]

As others have pointed out the Laffer curve may apply to overall effective tax rates applied to a whole population..but in a progressive tax system when one is talking about the top 1% of income earners.. I don't think the "hump" is going to be anywhere near 33% as in the top income tax bracket is 33%. For the effective tax rate of a person making millions of dollars a year to be anywhere close to 33%, the top income tax bracket would have to be much higher than 33%. Considering so many wealthy pay a lower effective tax rate than I do right now which is still a bit lower than 33% (I'm a single person earning a 6 figure income with 0 allowable credits or deductions), I don't think we are at the point yet where this Laffer curve theory should even be part of the equation.

 

[Manc Skipper]

The "Laffer curve" is the "Intelligent Design" of economics. It's the old debunked "trickle-down" dressed as science.

How Mumbo-Jumbo Conquered the World: A Short History of Modern Delusions - Francis Wheen - Google Books

 

[vash1012]

No.. its using logic..

The mantra that some in my party use that "lower taxes equals higher revenue".. is obviously not true because at some point.. taxes are so low that revenue is hurt..

BUT you don't seem to realize that YOUR liberal mantra of "higher taxes means higher revenue"... is also obviously not true because at some point.. taxes are so high that GDP is hurt and folks work to avoid those taxes...

Your economic research is absolutely flawed in that "optimal rates" being 73% and 80% or whatever is a bunch of BS.. because those are NOT effective tax rates. That's why rates are an absolutely a poor indicator of the effective of taxes. Because its not the effective tax rate.

Technically Romney is "supposed" to pay 39% right? Because he is so rich... but he pays close to 12%... because of the deductions and credits and being allowed to used capital gains.

You could raise Romneys earned income rate to 90% and you now how much his effective tax rate will change? Hardly noticeable.

That's a fact that liberals don't seem to get in your mantra... You rave about the high taxes of the 1940's and 1950's. Great.. and then go and look at the real indicator of just how much tax you are actually collecting which is measured by the percentage of GDP taxed. And you know what you find.. high marginal taxes and low marginal taxes and the actual rate of taxation per GDP stays right around 18.5%.

Raising tax rates above our current rates WOULD mean higher revenue up to a reasonable point if we didn't have so many ways to get around paying those taxes. Lower tax rates than our current rates are not ever going to raise revenues. There may be a caveat with "raising taxes will mean higher revenues", but its not a factually incorrect statement like "lower tax rates will increase revenues" is. "Raising effective tax rates within reasonable limits above our current rates by raising marginal tax rates, eliminating loop holes and deductions, and counting capital gains as income would increase revenue" is a factually true statement.

For the record, I only would want to do that so we can pay for the crap the previous generations have already bought and then hopefully balance our budget, cut taxes, and stop running up huge debt in the future.

 

[jaeger19]

That is true but it is not 33% -- or else there wouldn't have been a drop in revenue when Reagan and then Bush lowered taxes. According to the above research, the optimal marginal rate is between 73 and 80%.

This was real GDP growth during the 1950s to 2008. During that period there were lots of different top marginal rates -- from 90%, to 70%, to 50% to 39% to 35%. Notice where the periods of low taxation are? Neither do I.

You might want to look at your graph again... Look at the growth in in GDP during the 1950's to 1960's.. that's what? a 5 point increase over those 10 years? Now look at GDP as the marginal rates were LOWERED from 90 to 35. Do you see that The curve steepens as the growth steepens?

Now.. according to your graph.. one possibility would be that lower marginal rates were correlated with increased growth of GDP.

Certainly you could not argue that lower marginal rates cause a decrease in GDP and the economy.

 

[sawdust]

The "Laffer curve" is the "Intelligent Design" of economics. It's the old debunked "trickle-down" dressed as science.

How Mumbo-Jumbo Conquered the World: A Short History of Modern Delusions - Francis Wheen - Google Books

That's another piece of Tom Foolery that I never understood. Assuming business owners have more money in most cases, than employees, please explain to me how a capitalist society can ever function with anything other than trickle down.

 

[jaeger19]

Raising tax rates above our current rates WOULD mean higher revenue up to a reasonable point if we didn't have so many ways to get around paying those taxes. Lower tax rates than our current rates are not ever going to raise revenues. There may be a caveat with "raising taxes will mean higher revenues", but its not a factually incorrect statement like "lower tax rates will increase revenues" is. "Raising effective tax rates within reasonable limits above our current rates by raising marginal tax rates, eliminating loop holes and deductions, and counting capital gains as income would increase revenue" is a factually true statement.

For the record, I only would want to do that so we can pay for the crap the previous generations have already bought and then hopefully balance our budget, cut taxes, and stop running up huge debt in the future.

Well first things is that we have to stop talking about marginal rates and get down to effective tax rates and rates per GDP. THAT would be the way to really influence revenue...

"Lower tax rates will increase revenues" is not a factual incorrect statement because it depends on HOW you lower tax rates, on whom you lower them, and how high they are when you lower them. That's the problem with the liberal mantra.. that they are not willing to admit that some tax increases can hurt the economy and thus hurt revenue.

 

[Manc Skipper]

That's another piece of Tom Foolery that I never understood. Assuming business owners have more money in most cases, than employees, please explain to me how a capitalist society can ever function with anything other than trickle down.

Trickle-down is itself an updating of the "Horse and Sparrow" theory of the 1890's, wherein if you overfeed a horse enough oats, some will inevitably pass through for the sparrow by the roadside to pick out of the steaming pile.

 

[vash1012]

Well first things is that we have to stop talking about marginal rates and get down to effective tax rates and rates per GDP. THAT would be the way to really influence revenue...

"Lower tax rates will increase revenues" is not a factual incorrect statement because it depends on HOW you lower tax rates, on whom you lower them, and how high they are when you lower them. That's the problem with the liberal mantra.. that they are not willing to admit that some tax increases can hurt the economy and thus hurt revenue.

Yes, well, my point was that idea that lower our current effective tax rates will increase revenue is a factually incorrect statement. Our effective tax rates are not high enough, even according to the most stringent placement of the hump on the laffer curve, to be causing a decrease in revenue so in that regard it is a factually incorrect statement whereas the opposite is not true. According to that video, we can raise our effective tax rates quite a bit before actually causing a decrease in revenue. Now, of course, this is all separate from whether or not raising tax rates would "hurt the economy". They just won't hurt it enough to cause a decrease in revenue.

I would love it if we could simply the tax code and establish a progressive tax system that is easy to understand so when we have conversations about raising and lowering the tax rates even the least financially educated people would have a pretty good idea of what the effect would be.