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Edit: someone might want to move this from economics to politics - sorry about that.
At the extremes (100% and 0%) there's no doubt that a market economy could not function properly. However, where the debate gets distorted is on the "optimal level" of taxation. It seems like we have a situation where policy makers have adopted a theory with no empirical basis.
The Reagan, Bush, and Trump tax cuts are all justified on the idea that lowering taxes raises government revenue; conservative economists theorize that the optimal taxation level is too high. Here's the problem - how are they deriving the level of optimal taxation?
There's no consensus on the cost of the Bush tax cuts, but it seems like most estimates place it over $1 trillion - especially when taking into account interest payments on the national debt.
Basically, any ******* off the street can see that using Laffer to justify any new tax cuts is hilariously invalid. I can see how Kennedy lowering income tax rates from 90% would increase revenue. I can't see how Trump lowering corporate tax rates generates any increase in revenue. In sum, the theory is not inherently wrong, it's just exploited to encourage poor fiscal policy.
Edit: someone might want to move this from economics to politics - sorry about that.
At the extremes (100% and 0%) there's no doubt that a market economy could not function properly. However, where the debate gets distorted is on the "optimal level" of taxation. It seems like we have a situation where policy makers have adopted a theory with no empirical basis.
The Reagan, Bush, and Trump tax cuts are all justified on the idea that lowering taxes raises government revenue; conservative economists theorize that the optimal taxation level is too high. Here's the problem - how are they deriving the level of optimal taxation?
There's no consensus on the cost of the Bush tax cuts, but it seems like most estimates place it over $1 trillion - especially when taking into account interest payments on the national debt.
Basically, any ******* off the street can see that using Laffer to justify any new tax cuts is hilariously invalid. I can see how Kennedy lowering income tax rates from 90% would increase revenue. I can't see how Trump lowering corporate tax rates generates any increase in revenue. In sum, the theory is not inherently wrong, it's just exploited to encourage poor fiscal policy.
You're 100% correct, the model ONLY works in single supply sided theory.
At the extremes (100% and 0%) there's no doubt that a market economy could not function properly.
The functioning of a market economy has nothing to do with the Laffer Curve.
Arthur famously drew the famous curve on a napkin at a Diner to explain a very simple concept that is ineluctably self-evident:
At an income tax rate of zero, no tax dollars are collected. No one who passed Econ 101 disagrees with this.
At an income tax rate of 100% (or higher), no one has an incentive to work, and thus no tax dollars are collected. No one who passed Econ 101 disagrees with this.
At every income tax rate greater than zero but less than 100%, some tax revenue is collected. No one who passed Econ 101 disagrees with this.
THEREFORE, as surely as night follows day, there exists at least one tax rate (possibly more than one) for which the total tax dollars collected will greatest. Anyone who passed geometry and calculus and econ 101 agrees.
That's it.
Quote:
Originally Posted by Drewjdeg
However, where the debate gets distorted is on the "optimal level" of taxation.
The Laffer Curve has nothing to do with a hypothetical "optimal level" of taxation. Nothing. At. All.
The purpose of taxation is to collect the requisite amount of tax revenue to purchase the desired level of government goods and services.
Those two concepts do not have anything to do with one another.
Quote:
Originally Posted by Drewjdeg
It seems like we have a situation where policy makers have adopted a theory with no empirical basis.
No, that is not correct. There is no theory adopted, and hence no empirical evidence is required for a non-theory.
Quote:
Originally Posted by Drewjdeg
The Reagan, Bush, and Trump tax cuts are all justified on the idea that lowering taxes raises government revenue;
No, that is not true. The Kennedy tax cut was justified on that idea, but not the Reagan, Bush or Trump era tax cuts, nor the Clinton nor Obama era tax increases.
Quote:
Originally Posted by Drewjdeg
conservative economists theorize that the optimal taxation level is too high.
No, that is not true. All economists know that there is no such thing as an "optimal taxation level." Therefore, it can neither be too high nor too low, because there is no optimal amount.
The purpose of taxation is to collect the requisite funds for the level of government goods and services we collectively wish to purchase.
Quote:
Originally Posted by Drewjdeg
Here's the problem - how are they deriving the level of optimal taxation?
Economists do not derive an optimal level of taxation, because no such concept exists in economics.
Quote:
Originally Posted by Drewjdeg
There's no consensus on the cost of the Bush tax cuts
Tax cuts do not cost money. The purchase of government goods and services costs money. Tax cuts never cost money; they may alter the quantity of funds collected by the taxing authorities, but the never cost money.
Quote:
Originally Posted by Drewjdeg
Basically, any ******* off the street can see that using Laffer to justify any new tax cuts is hilariously invalid.
Finally, you've hit on something that is true. The Laffer Curve shows the following very simple concept that is ineluctably self-evident:
At an income tax rate of zero, no tax dollars are collected. To use your words, "Basically, any ******* off the street can see that."
At an income tax rate of 100% (or higher), no one has an incentive to work, and thus no tax dollars are collected. To use your words, "Basically, any ******* off the street can see that."
At every income tax rate greater than zero but less than 100%, some tax revenue is collected. To use your words, "Basically, any ******* off the street can see that."
THEREFORE, as surely as night follows day, there exists at least one tax rate (possibly more than one) for which the total tax dollars collected will greatest. To use your words, "Basically, any ******* off the street can see that."
Clearly, you never use the above to justify either raising or lowering tax rates.
Tax policy can be effectively used for many things, including encouraging capital formation, altering behaviour, achieving competitiveness, etc.
Edit: someone might want to move this from economics to politics - sorry about that.
At the extremes (100% and 0%) there's no doubt that a market economy could not function properly. However, where the debate gets distorted is on the "optimal level" of taxation. It seems like we have a situation where policy makers have adopted a theory with no empirical basis.
The Reagan, Bush, and Trump tax cuts are all justified on the idea that lowering taxes raises government revenue; conservative economists theorize that the optimal taxation level is too high. Here's the problem - how are they deriving the level of optimal taxation?
There's no consensus on the cost of the Bush tax cuts, but it seems like most estimates place it over $1 trillion - especially when taking into account interest payments on the national debt.
Basically, any ******* off the street can see that using Laffer to justify any new tax cuts is hilariously invalid. I can see how Kennedy lowering income tax rates from 90% would increase revenue. I can't see how Trump lowering corporate tax rates generates any increase in revenue. In sum, the theory is not inherently wrong, it's just exploited to encourage poor fiscal policy.
The lie about tax cuts leading to more revenue is that the Republicans increase federal expenditures to stimulate the economy in conjunction with the proposal for income tax cuts. Of course, you'll have more tax revenue when you increase spending by 400 billion dollars. Income tax revenues are the primary funding source for discretionary programs, of which the DoD is the largest budget category.
The functioning of a market economy has nothing to do with the Laffer Curve.
Arthur famously drew the famous curve on a napkin at a Diner to explain a very simple concept that is ineluctably self-evident:
At an income tax rate of zero, no tax dollars are collected. No one who passed Econ 101 disagrees with this.
At an income tax rate of 100% (or higher), no one has an incentive to work, and thus no tax dollars are collected. No one who passed Econ 101 disagrees with this.
At every income tax rate greater than zero but less than 100%, some tax revenue is collected. No one who passed Econ 101 disagrees with this.
THEREFORE, as surely as night follows day, there exists at least one tax rate (possibly more than one) for which the total tax dollars collected will greatest. Anyone who passed geometry and calculus and econ 101 agrees.
That's it.
The Laffer Curve has nothing to do with a hypothetical "optimal level" of taxation. Nothing. At. All.
The purpose of taxation is to collect the requisite amount of tax revenue to purchase the desired level of government goods and services.
Those two concepts do not have anything to do with one another.
No, that is not correct. There is no theory adopted, and hence no empirical evidence is required for a non-theory.
No, that is not true. The Kennedy tax cut was justified on that idea, but not the Reagan, Bush or Trump era tax cuts, nor the Clinton nor Obama era tax increases.
No, that is not true. All economists know that there is no such thing as an "optimal taxation level." Therefore, it can neither be too high nor too low, because there is no optimal amount.
The purpose of taxation is to collect the requisite funds for the level of government goods and services we collectively wish to purchase.
Economists do not derive an optimal level of taxation, because no such concept exists in economics.
Tax cuts do not cost money. The purchase of government goods and services costs money. Tax cuts never cost money; they may alter the quantity of funds collected by the taxing authorities, but the never cost money.
Finally, you've hit on something that is true. The Laffer Curve shows the following very simple concept that is ineluctably self-evident:
At an income tax rate of zero, no tax dollars are collected. To use your words, "Basically, any ******* off the street can see that."
At an income tax rate of 100% (or higher), no one has an incentive to work, and thus no tax dollars are collected. To use your words, "Basically, any ******* off the street can see that."
At every income tax rate greater than zero but less than 100%, some tax revenue is collected. To use your words, "Basically, any ******* off the street can see that."
THEREFORE, as surely as night follows day, there exists at least one tax rate (possibly more than one) for which the total tax dollars collected will greatest. To use your words, "Basically, any ******* off the street can see that."
Clearly, you never use the above to justify either raising or lowering tax rates.
Tax policy can be effectively used for many things, including encouraging capital formation, altering behaviour, achieving competitiveness, etc.
Maximizing tax revenue is a non-objective.
Maximizing tax revenue can be an objective; optimal tax theory is a legitimate area of study.
As to Arthur Laffer not being related to Trump - that's not true. He was an advisor and heavily influenced this plan.
Quote:
House Speaker Paul Ryan tells me that “there were very few economists who had a bigger impact on this tax bill than Laffer. Believe, me our [Republican] members listen to him.”
A lot of the literature is intentionally misleading. They often leave out the fact that payroll taxes were increased around the same time, budget outlays were increased, or that the revenues include both payroll taxes and income taxes. When you look at only the income tax receipts, they immediately declined as a result of cutting the income tax rates and took some time to recover to the levels before the change. They're going to try to use the current situation as supportive of Laffer's theory if receipts rise, but fail to disclose that these were deferred tax obligations that weren't being taxed.
There's no consensus on the cost of the Bush tax cuts,...
They cost nothing, because tax cuts cost nothing. The claim that tax cuts have to be paid for is Left-Wing propaganda.
Quote:
Originally Posted by Drewjdeg
but it seems like most estimates place it over $1 trillion - especially when taking into account interest payments on the national debt
Government needs to reduce spending.
Quote:
Originally Posted by Drewjdeg
I can see how Kennedy lowering income tax rates from 90% would increase revenue.
Tax rates were not 90%. First it was 91% not 90%, and it wasn't 91% of all income, it was only 91% on a fraction of income. There were in fact 25 different tax brackets, starting at 20%.
As has been proven ad nauseum, the effective tax rate was 35%-42% depending on an individual's exact circumstances.
Most people are totally ignorant of the fact that the IRS Tax Code of 1954, which was in effect until 1986, is not even remotely similar to the IRS Tax Code of 1986, which makes comparisons invalid.
Quote:
Originally Posted by Drewjdeg
I can't see how Trump lowering corporate tax rates generates any increase in revenue. In sum, the theory is not inherently wrong, it's just exploited to encourage poor fiscal policy.
The Department of Agriculture is poor fiscal policy. The Department of Agriculture is unnecessary. All that's needed is an office to collect, analyze and report data on agricultural land use and crop yields, and such an office can be properly located within the Department of Interior.
The Department of Agriculture has caused you more harm than good.
You pay higher than market prices for milk and dairy products, due to poor fiscal policies by the Department of Agriculture.
You get screwed three times by the Department of Agriculture as it relates to ethanol. First, you get screwed because your tax dollars are wasted subsidizing corn growers and ethanol producers, second, you get screwed because you pay higher gasoline prices due to the higher costs of ethanol because corn prices are higher, and third, you get screwed because you pay higher food prices not only in the grocery store, but at restaurants as well, because corn is diverted from the commercial and consumer food markets to the ethanol market.
A better fiscal policy would have been to provide no-interest or low-interest loans (0.5%-3.0%) to people to purchase some of the 1+Billion acres of fallow farmland in the US for the express purpose of growing sugar beets, which produce 714 gallons of ethanol per acre compared to 354 gallons per acre of corn.
Not only would your gasoline prices be lower, your food prices at grocery and restaurants would be lower as well, and you would not be wasting money to subsidize ethanol.
You don't need a Department of Agriculture to administer SNAP benefits, which are fundamentally unfair.
Because of the tremendous variance in Cost-of-Living across the US, the government's one-size-fits-all program of $520/month to a family doesn't work, because $520 only buys $310 worth of food in some areas of the US, while it buys $780 worth of food in other areas.
The policy might be in keeping with the Liberal idea that some pigs are more equal than others, but it actually does harm to families and there's no possible way you can justify that.
The States are more than capable of implementing their own SNAP benefits, tailored to the Cost-of-Living in their State, which will eliminate the fundamental unfairness that now exists.
You don't need a Department of Housing & Urban Development, either. Since its inception, you've wasted more than $500 Billion on the City of Detroit, and you've got nothing to show for it. You don't need HUD for subsidized housing, either. Many States operate their own subsidized housing programs, and even for those States that don't, and Ohio doesn't, cities and counties operate their own subsidized housing programs. The City of Cincinnati runs its own subsidized housing program, and Butler County, Ohio, with a population of 375,000, runs its own subsidized housing program, so there's no need for the federal government to do it.
You don't need a Department of Transportation. All you need is an office to collect, analyze and report transportation data. The government can rescind the federal excise tax on gasoline and States can increase their gasoline by an equivalent amount and fund their own transportation needs, instead of wasting $Billions on the Bridge to Nowhere, the Exit Ramp to Nowhere and the many other follies.
Not for the electorate. The electorate's interest is in how much government to purchase, not to maximize goverment's tax revenue. It is a very uninteresting mathematical exercise to estimate the tax rate(s) that generate maximum tax revenue.
Quote:
Originally Posted by Drewjdeg
optimal tax theory is a legitimate area of study.
Not in the sense of mathematical optimization of an objective function subject to numerous constraints.
It *is* a legitimate area of study where "optimal" takes on an entirely, non-mathematical definition. In that sense, an optimal tax (and subsidy) is one that imposes the fewest distortions to the otherwise obtainable efficient allocation of resources -- but I do not think that is what you're referring to.
The above articles are not interesting. The former is a trivial effort to locate one of the point(s) on the Laffer curve that maximizes tax revenue. Said differently, it is an attempt to *prove* the Laffer Curve by finding one such point - but such a proof is hardly necessary.
The latter article incorrectly asserts:
"Models in optimal tax theory typically posit that the tax system should maximize a social welfare function subject to a government budget constraint..."
The correct assertion would be "models of social welfare posit that a government expenditure system should maximize a total societal welfare function subject to a government budget constraint."
Tax system should cannot maximize a social welfare function; all it can do is minimize the damage done by the effects of a misallocation of capital as a result of the existence of the tax system.
The authors continue by articulating a dubious assumption as if it were cast in concrete:
"Social welfare is larger when resources are more equally distributed." Such an assumption, taken as one of the gospels of the Church of the Progressive is debatable.
The authors have 3 conclusions:
First, very high earners should be subject to high and rising marginal tax rates on earnings.
Second, low income families should be encouraged to work with earnings subsidies, which should then be phased-out with high implicit marginal tax rates.
Third, capital income should be taxed.
That is, the latter article has no bearing on the validity of the Laffer Curve. The Original Post was a slap to conservative economics and Republican presidents regarding the "Optimal Level of Taxation." The latter article has nothing to say about "the Optimal Level of Taxation." It looks at tax systems, not tax levels.
As to Arthur Laffer not being related to Trump - that's not true. He was an advisor and heavily influenced this plan.
Don't have time to respond to the rest right now.
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allow me to be brief
