Sunday, November 09, 2008

What Art Laffer Doesn't Understand

How if you tax people who work and pay people who don’t, you’ll get more people working?

~CNBC's Kudlow & Company, Friday evening

11 Comments:

At 11/09/2008 12:23 PM, Anonymous Machiavelli999 said...

Because they are the most likely people right not to actually spend the money.

While, the others will just put it in the bank and that money might as well be gone then cause the banks aren't lending it out.

And even when they do start lending it out eventually, it will probably be to finance some other stupid bubble that will contribute nothing substantial to our growth.

 
At 11/09/2008 12:50 PM, Anonymous ej said...

Machiavelli,

You have revealed yourself to have no fundamental understanding of the role of capital as a factor of production.

You seem to acknowledge that such tax scheme redistributes money from savings/capital to consumption. This has the effect of shifting the aggregate supply curve to the left while shifting the aggregate demand curve to the right. This yields higher real interest rates. The result is higher prices for the output of any level of goods, or put in other terms lower real wages or a lower standard of living.

 
At 11/09/2008 2:08 PM, Blogger Acton. said...

I have a question. It makes logical sense to say that punishing work and rewarding non work would...lead to less work, but is there any academic evidence that this is so?

I have serious doubts whether taxes can dramatically affect people's motivation to work.

 
At 11/09/2008 2:49 PM, Anonymous Anonymous said...

Acton; I don't know about you, but I'm lazy. Beyond a minimal amount of work to keep myself from being bored, I do what I do every day because I'm paid. If I got less money but plenty enough to live on with doing no effort, I'd do it. I didn't get a college degree and acquire skills just because I wanted to feel better about myself; it's all about the money. Similarly, offer me higher pay for a more difficult position, and I'll step up to that challenge.

Offer me less for the same work, and I'm liable to quit.

But if you feel like working hard for less, well, to each their own!

 
At 11/09/2008 6:32 PM, Anonymous Anonymous said...

You guys are missing it. The government will have to hire at least three people to handle this welfare program. A manager, a supervisor and an employee. Congress will probably set up a seperate subcommittee to oversee the program and that will mean hiring staff ...

Everyone will get union scale and receive bullet proof healthcare benefits and retirement.

If it weren't so tragic, it would be funny.

 
At 11/10/2008 7:49 AM, Anonymous poor boomer said...

Who is paying people who don't work???

 
At 11/10/2008 8:20 AM, Anonymous Anonymous said...

Who is paying people who don't work???

The top 40% of income earners.

 
At 11/10/2008 10:12 AM, Anonymous Anonymous said...

Acton,
Academic evidence? How about existential evidence, Cuba, North Korea, etc.

 
At 11/10/2008 10:59 AM, Anonymous Anonymous said...

Acton,
Academic evidence? How about existential evidence, Cuba, North Korea, etc.


...the Soviet Union. And you don't even have to go that far - Western Europe. There, the benefits extended for not working are so lush - provided that you have some "legitimate" reason for not working. Legitimate reasons in Germany include an allergy to electricity. Never heard of it? Neither have allergists, but that doesn't stop government from redistributing wealth. As a result, the number of dependents on the welfare state has grown 400% while the number of people paying into the welfare state has grown about 4%. Can we say "unsustainable"?

Working costs you something. It costs you the time, commitment and money to educate yourself. Then, it costs you time away from your spouse, your parents, your kids and a million other leisure activities. Generally speaking, people (myself included) work only as much as we feel compensated for. If the tax rate increases, they will feel like they are working harder than they are being compensated for and either reduce their productivity or find a job that requires less of them. We'll continue to work, but we will produce much less and there will be ever less to "spread around". This has been the pattern in every country that has increased redistribution and tax rates. Have a look at statistics for Europe and look at the response to policy changes.

 
At 11/10/2008 4:53 PM, Anonymous poor boomer said...

anonymous said:

Who is paying people who don't work???

The top 40% of income earners.


When I was unemployed, nobody was paying me. How did I miss out?

 
At 11/11/2008 6:03 AM, Blogger 1 said...

"When I was unemployed, nobody was paying me. How did I miss out?"...

Incompetence?

 

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