Putting a stake in the heart of the Laffer Curve.

[Kidlicious]

Originally posted by Drake Tungsten

No one knows where the apex of the Laffer curve lies. Not that it even exists, as there's no such thing as a literal Laffer curve. It's just a simplified illustration that helps people understand why tax rates that are too high can actually reduce tax revenues.

....

Criticize the Republicans then, if that's what you believe. There's no need to claim to be putting a "stake in the heart of the Laffer curve", which is a pretty uncontroversial economic concept.

Actually, taxes have to be increased so much to cause a decrease in revenue that the Laffer concept is completely irrelevent to any real circumstance.

[Kidlicious]

Originally posted by Ogie Oglethorpe
Read the conclusion section especially. Its the tax cuts for the 10% tax bracket (low income) child care credit and marriage penalty, that cause the GDP to go negative in the long run.

I got tired of waiting for it to download. Why do they think that tax credits for low income people cause decrease in GDP? That's a new one for me.

[Ogie Oglethorpe]

Kid I'll get back to you (Try downloading it in the meantime) but in the meantime I also missed this gem which caveats everything that the author apparently was writing about.

"Fifth, this model likely overstates the economic cost of deficit finance of temporary tax relief as the rate of returns of government bonds in the model is greater then the rate of growth in GNP. Historically, the average return on government debt is below the average growth rate of the economy, which implies it might not be necessary to increase taxes in the future in order to stabilize the government debt ratio. Some research suggests that the need to rasie future tax rates to pay for temporary tax relief only occurrs with a small probability. 18"

Apparently Mr. Furman needs to learn how to read. Scratch that learn to read and write.

whoops - edit - color me embarassed . I need to learn to read. The caveat was about temporary tax releif not necessarily making said tax releif permanent.


Still all that being said I think it safe to say the dynamic analysis looks to be a low ball projection. (I wanted to say conservative projection but knew folks would jump all over the use of the word conservative)

[RGBVideo]

[SIZE=1] Originally posted by Drake Tungsten
No one knows where the apex of the Laffer curve lies. Not that it even exists, as there's no such thing as a literal Laffer curve. It's just a simplified illustration that helps people understand why tax rates that are too high can actually reduce tax revenues.

An excellent summary which said all that needs to be said about this subject.