Friday, January 25, 2008

Want Lower Tax Revenue? Here's How....

Using recent data, it would appear on its face that the Democratic proposal to raise taxes on the upper-income earners, and lower taxes on the middle- and lower- income earners, will result in huge revenue losses on both accounts (see diagram above, click to enlarge).

~Arthur Laffer in today's WSJ, "The Tax Threat to Prosperity"


At 1/25/2008 3:38 PM, Anonymous Anonymous said...

I won't question the idea itself, since i belive it's true.

But one little offtopic remark: Do you think, there may be two DIFFERENT Laffer curves - one for the "Poor" group and one for the "Rich" group?

At 1/25/2008 3:53 PM, Blogger Unknown said...

This is absurd. That we know there is a laffer curve for the individuals in question does not mean we know where we are on it.

At 1/25/2008 4:21 PM, Anonymous Anonymous said...

Graphic makes NO sense at all...kindly explain!

At 1/25/2008 4:51 PM, Blogger juandos said...

Good stuff from Laffer as usual: "Let's take a look at the bottom 75% of taxpayers over this same time period -- the group current Democrats refer to as middle- and lower-income earners. From 1981 through 2005, the share of all income taxes paid by the bottom 75% of all income earners (as reported on the individual income tax returns) declined to 14.01% from 27.71%. As a share of GDP, total taxes paid by the bottom 75% fell to 1.05% from 2.50%. The bottom 75% of all taxpayers today pay less than 35% of all the taxes paid by the top 1% of all income earners.

Over the last 25 years, the bottom 75% of all taxpayers' tax payments fell and their tax rates fell. This is the group the Democrats are targeting for tax cuts.

My question and one Laffer doesn't really address is that how much of the net dollars are are lost due to various taxes on purchases of goods and services?

At 1/25/2008 6:04 PM, Anonymous Anonymous said...

I've followed laffer for 25 years and I can not think of a single prediction of his that turned out to be right.

Can you name one?

At 1/26/2008 10:16 AM, Anonymous Anonymous said...

Puhleeze, any time income tax rates are cut, federal income tax revenues decline. There is no free lunch (TANSTAAFL).

Cyclically Adjusted Tax Revenues.

The problem with Laffer's position is that he does not standardize nor normalize the revenues to the business cycle nor standardize nor normalize income of the top 1%.

Similar manipulation of statistics for ideological purposes is also a big problem with the data presented by our blog host.

At 1/26/2008 12:38 PM, Anonymous Anonymous said...

marmico, your link doesn't address tax revnues, it addresses tax revenues as a percent of GDP. Apples and oranges.

Tax rate cuts have increased nominal tax revenues every time they have been employed, contrary to your claim. The evidence isn't difficult to find, but I am in the middle of several projects at the moment. The onus is yours, if you want to learn the truth and rid yourself of reactionary, Krugman-type lies. Krugman is an execrable ideologue who has been caught twisting data and propagandizing for his leftist masters so many times that he is irrelevant.


At 1/26/2008 3:34 PM, Anonymous Anonymous said...

This graph is amazing since it assumes we know three things:
1) the location of the peak of the Laffer curve
2) that the "rich" tax rate is above the peak
3) the "poor" tax rate is below the peak.

In reality, we don't know any of these things. But the reverse implication is kind of ludicrous: the solution to all our problems is to raise taxes on the "poor" and lower taxes on the "rich." Thus, let's the poor poorer and the rich richer. Does anybody take this seriously?

And badly drawn graphs aside, yes Krugman hates everything that even slightly resembles a Republican. However, unlike Laffer, he's a top notch economist and his non-political opinions are highly respected. He does not manipulate data, he merely shows things which many people wish were not true. It does not follow, however, that he is an "execrable ideologue who has been caught twisting data and propagandizing for his leftist masters."

If you want lower tax rates for the rich, great, just say so. Please don't continue making poor economic arguments to justify your desired policy.

At 1/26/2008 6:52 PM, Anonymous Anonymous said...

Correction, 2nd paragraph of previous post: "Thus, let's make the poor poorer and the rich richer."

At 1/28/2008 6:31 PM, Anonymous Anonymous said...

The Laffer curve is the most ridiculous concept ever created. It's a shame to you and to the WSJ that you continue to put forth this garbage.


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