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Old December 30th, 2014, 02:36 PM   #1
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The Laffer Curve Turns 40

There is an interesting column which I am not going to reprint in its entirely but is linked below about the Laffer Curve. But one passage stood out to me.

Discuss.

Quote:
Even liberals unwittingly acknowledge the Laffer Curve truth when they support higher tobacco taxes to stop smoking or a new carbon tax to reduce global warming. If higher carbon taxes reduce CO2 emissions, why is it so hard to understand that higher taxes on work or investment lead to less of these?

When I asked Laffer if, 40 years later, there is any point of consensus in economics on the Laffer Curve, he replied: I think today everyone agrees with the premise that when you tax something you get less of it, and when you tax something less, you get more of it.
The Laffer Curve turns 40: the legacy of a controversial idea - The Washington Post
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Old December 30th, 2014, 04:31 PM   #2
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During the Bush Administration taxes were decreased a number of times. The deficit increased, wages remained stagnant and a recession loomed. Laffer can have his theory, I'll stick to facts.
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Old December 30th, 2014, 04:49 PM   #3
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Quote:
Originally Posted by Camelot View Post
During the Bush Administration taxes were decreased a number of times. The deficit increased, wages remained stagnant and a recession loomed. Laffer can have his theory, I'll stick to facts.
The theory is valid as far as it goes. The problem is that no one can define the shape of the curve. Since we don't know where the maximum is no one can say which direction taxes should be shifted to optimize the economy.

But any comment on the tobacco taxes and carbon taxes effects?
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Old December 30th, 2014, 06:10 PM   #4
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The Laffer Curve can be applied to anything.
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Old December 31st, 2014, 02:49 AM   #5
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Quote:
Originally Posted by RNG View Post
The theory is valid as far as it goes. The problem is that no one can define the shape of the curve. Since we don't know where the maximum is no one can say which direction taxes should be shifted to optimize the economy.

But any comment on the tobacco taxes and carbon taxes effects?
If cigarette taxes ( an addictive substance) were lowered, does that mean more people would take up smoking ? This is a total false equivalent. Also, the theory has been proven over and over not to be valid. The most recent evidence that it's a flawed theory was the Bush Administration and the Brownback experiment in Kansas. For a theory to be considered valid, it must have data in the real world to substantiate it. Have any examples ?
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Old December 31st, 2014, 03:34 AM   #6
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The thing to remember about the Laffer curve is that it says if taxes are low then "If taxes go up, revenues go up, if taxes go down, revenues go down" and that part is true.

It also predicts that if taxes are high then "if tax rates go up, revenues decline, if tax rates go down, revenues increase", that is also probably true.

What it doesn't provide is an indication where the transition between low taxes and high taxes takes place. The evidence of the last half century is that we are in the place where tax cuts reduce revenue, and tax increases increase revenue.
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Old December 31st, 2014, 06:42 AM   #7
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The last time I looked, our current tax rates were well below optimal on even the most conservative of Laffer curves.
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Old December 31st, 2014, 07:02 AM   #8
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They don't seem to be too bright at the Washington Post. To suggest that smoking has decreased solely as a result of higher taxes is nothing short of ignorant. Taxes certainly played a part but, so did the millions spent on health awareness ad campaigns. Also, the fact that businesses and employers have banished smoking from their premises thereby turning smokers into social pariahs had a teeny weeny bit to do with it. People like to think economic theory can be explained in such simplistic and sophomoric terms but, in reality it demands a deeper level of thinking.
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Old December 31st, 2014, 08:07 AM   #9
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Quote:
Originally Posted by goober View Post
The thing to remember about the Laffer curve is that it says if taxes are low then "If taxes go up, revenues go up, if taxes go down, revenues go down" and that part is true.

It also predicts that if taxes are high then "if tax rates go up, revenues decline, if tax rates go down, revenues increase", that is also probably true.

What it doesn't provide is an indication where the transition between low taxes and high taxes takes place. The evidence of the last half century is that we are in the place where tax cuts reduce revenue, and tax increases increase revenue.
When GWB lowered taxes, federal revenues rose, especially from corporate income taxes and the deficit was reduced. When Obama made most of the GWB cuts permanent federal revenues rose.
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Old December 31st, 2014, 09:15 AM   #10
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Quote:
Originally Posted by Camelot View Post
During the Bush Administration taxes were decreased a number of times. The deficit increased, wages remained stagnant and a recession loomed. Laffer can have his theory, I'll stick to facts.
Actually that is not true.. The 3 year long Clinton Recession did not end until 2003..People seem to forget the stock market (NASDAQ lost 55% of its value, DOW lost 18% and S&P lost 20% of it's value.

Bush Tax cuts did not go into effect until OCT 1 2002.. 3 MONTHS after this the Recession caused by the Tech Bubble, ended just 2 months later. and y
The markets recovered its total value from the hit the markets took from the 911 attacks, and eventually reached record Highs of that time, (WITHOUT THE FED FEEDING 89 BILLION DOLLARS/MONTH to the markets.

Median wages during the Bush Administration INCREASED by 5,000 dollars/year.
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Last edited by TNVolunteer73; December 31st, 2014 at 09:19 AM.
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