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Tax cuts may have not generated more revenue in Kansas, but there is definitely something to the theory that lowering taxes can generate more revenue. As the La

Tax cuts may have not generated more revenue in Kansas, but there is definitely something to the theory that lowering taxes can generate more revenue. As the Laffer Curve predicts, maximum government revenue exists at a tax rate above 0% (no taxes) and below 100% (no reason to work). Determining that maximizing rate is the trick. If your tax rate is below the maximizing rate, then raising taxes would generate more revenue. But if your tax rate is above the maximizing rate, then lowering taxes would actually generate more revenue for the government.

Latty 9y ago
Yes, but is there any evidence to suggest we are moving the right way by lowering taxes?
aerotwelve 9y ago
If memory serves, that maximizing rate was somewhere around 50% under Laffer's initial model, which is why the first Reagan tax cut reduced the top income bracket from 70% to 50%. Now we're at 37%, and I guarantee you that's still considered too high by the Ryan types.
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bjourne 9y ago
I don't think there is anything to the theory. The Laffer Curve works great in theory, in practice it never does. http://economistsview.typepad.com/economistsview/2012/06/laughing-at-the-laffer-curve.html http://economistsview.typepad.com/economistsview/2012/06/lau... "Not aware of any evidence in recent history where tax cuts actually raise revenue. Sorry, Laffer."
maxxxxx 9y ago
"but there is definitely something to the theory that lowering taxes can generate more revenue" There isn't. There is something to the theory that changing(!!) tax rates can generate more revenue. I haven't seen any evidence that we are on the side of the maximizing rate where lowering taxes is necessary.
thephyber 9y ago
There is no single tax rate in the US. There are at least three different granularities of jurisdiction (federal, state, local) and many different types of taxation schemes (income taxes, property taxes, transaction/sales taxes, fees, etc) most of which have exclusions, deductions, etc. and all of which distort the effects of taxation. The Laffer Curve doesn't account for the massive complexity of taxes in the USA nor does it account for the game theory of moving revenues and/or profits to different jurisdictions or transactions moving into the black market.

Latty 9y ago

Yes, but is there any evidence to suggest we are moving the right way by lowering taxes?

aerotwelve 9y ago

If memory serves, that maximizing rate was somewhere around 50% under Laffer's initial model, which is why the first Reagan tax cut reduced the top income bracket from 70% to 50%. Now we're at 37%, and I guarantee you that's still considered too high by the Ryan types.

deleted 9y ago
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bjourne 9y ago

I don't think there is anything to the theory. The Laffer Curve works great in theory, in practice it never does. http://economistsview.typepad.com/economistsview/2012/06/laughing-at-the-laffer-curve.html http://economistsview.typepad.com/economistsview/2012/06/lau... "Not aware of any evidence in recent history where tax cuts actually raise revenue. Sorry, Laffer."

maxxxxx 9y ago

"but there is definitely something to the theory that lowering taxes can generate more revenue" There isn't. There is something to the theory that changing(!!) tax rates can generate more revenue. I haven't seen any evidence that we are on the side of the maximizing rate where lowering taxes is necessary.

thephyber 9y ago

There is no single tax rate in the US. There are at least three different granularities of jurisdiction (federal, state, local) and many different types of taxation schemes (income taxes, property taxes, transaction/sales taxes, fees, etc) most of which have exclusions, deductions, etc. and all of which distort the effects of taxation. The Laffer Curve doesn't account for the massive complexity of taxes in the USA nor does it account for the game theory of moving revenues and/or profits to different jurisdictions or transactions moving into the black market.