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What do you mean arithmetically? Simply increasing taxes to without attempting to reduce spending growth might not be a good long term strategy, but it not like

by gisely 8y ago

What do you mean arithmetically? Simply increasing taxes to without attempting to reduce spending growth might not be a good long term strategy, but it not like the laws of arithmetic prevent it. Whether we could raise tax revenue 24% is different question than whether we should.

briandear 8y ago
If you taxed at 100% and still had a deficit, then yes, it’s arithmetically inpossible. With higher taxes past a certain point revenue decreases, per the Laffler Curve.
- patrickthebold 8y ago
  Well sure, but we are nowhere near there. The 2018 deficit was less than 4% of gdp. https://www.usgovernmentdebt.us/federal_deficit_percent_gdp https://www.usgovernmentdebt.us/federal_deficit_percent_gdp The Laffer curve is not interesting when you are way on the left side of it.
  - brain5ide 8y ago
    That 4% is very deceptive. It gives the impression, that there is some room to stretch it. But is there? I mean, you're talking 4% of a situation where 100% is total heat death of all the participants in the economy. Where any amount gained in the system goes towards the deficit. This is bonkers.
    - lmm 8y ago
      Our ancestors would probably think that an economy that spends 97% of GDP on things unrelated to food production is bonkers, but here we are. If high government debt was decreasing economic participation that would be cause for concern. But is there any reason to believe it is? Japan is running a much higher debt-to-GDP ratio and while people are (probably rightly) worried, the fact that nothing catastrophic has happened there yet suggests that there's at least that much slack available.
- flomble 8y ago
  It's confusing to use the hypothetical of 100% in one sentence and in the next acknowledge that the optimal rate of taxation for maximising revenues is not at 100%. The question is whether tax revenues could be raised by raising tax rates to the point that revenues exceeded current expenditure. Whether or not that is possible is uncertain.

by gisely 8y ago

briandear 8y ago

If you taxed at 100% and still had a deficit, then yes, it’s arithmetically inpossible. With higher taxes past a certain point revenue decreases, per the Laffler Curve.

patrickthebold 8y ago
Well sure, but we are nowhere near there. The 2018 deficit was less than 4% of gdp. https://www.usgovernmentdebt.us/federal_deficit_percent_gdp https://www.usgovernmentdebt.us/federal_deficit_percent_gdp The Laffer curve is not interesting when you are way on the left side of it.
- brain5ide 8y ago
  That 4% is very deceptive. It gives the impression, that there is some room to stretch it. But is there? I mean, you're talking 4% of a situation where 100% is total heat death of all the participants in the economy. Where any amount gained in the system goes towards the deficit. This is bonkers.
  - lmm 8y ago
    Our ancestors would probably think that an economy that spends 97% of GDP on things unrelated to food production is bonkers, but here we are. If high government debt was decreasing economic participation that would be cause for concern. But is there any reason to believe it is? Japan is running a much higher debt-to-GDP ratio and while people are (probably rightly) worried, the fact that nothing catastrophic has happened there yet suggests that there's at least that much slack available.
flomble 8y ago
It's confusing to use the hypothetical of 100% in one sentence and in the next acknowledge that the optimal rate of taxation for maximising revenues is not at 100%. The question is whether tax revenues could be raised by raising tax rates to the point that revenues exceeded current expenditure. Whether or not that is possible is uncertain.