Tweet
See, if it’s the act of cutting taxes that matters, not the start and end points, then clearly, you don’t want to move from the current economic hellscape of a 35% top rate (according to Wikipedia, anyway) to whatever the optimum tax rate would be– not zero, because if we had zero taxes, we wouldn’t have the money to fund futile foreign wars, and we couldn’t have that, but some very small rate that we’ll call ε– in a single step. Clearly, you would be better off splitting that cut into two smaller cuts, each of:
K=(R-ε)/2
(where K is the amount you reduce the tax rate and R is the current rate). Cut taxes once this year, and reap the benefits of magic economic growth, and again next year, and you’ll get twice the growth. It’s a win-win.
But it gets better…
If two cuts are good, then three would be even better. Cut the rate by
K=(R-ε)/3
for each of the next three years, and you get three years of economic growth. And, of course, being savvy math-capable types, you can immediately see where this is going. If each tax cut gives you economic growth, than you can guarantee N years of increased growth by cutting the rate by:
K=(R-ε)/N
each year for the next N years.
Like a good physicist, of course, I immediately recognize that that N in the denominator gives us the opportunity to take the limit as N goes to infinity, effectively turning the sum of cuts into an integral. In which case, we can generate infinite economic growth. The tax rate will asymptotically approach ε, but the economy will increase without limit. Soon, we’ll control the economic resources of the entire Virgo cluster, and we’ll be able to build particle accelerators to probe the Planck scale using change found in the couch.
K=(R-ε)/2
(where K is the amount you reduce the tax rate and R is the current rate). Cut taxes once this year, and reap the benefits of magic economic growth, and again next year, and you’ll get twice the growth. It’s a win-win.
But it gets better…
If two cuts are good, then three would be even better. Cut the rate by
K=(R-ε)/3
for each of the next three years, and you get three years of economic growth. And, of course, being savvy math-capable types, you can immediately see where this is going. If each tax cut gives you economic growth, than you can guarantee N years of increased growth by cutting the rate by:
K=(R-ε)/N
each year for the next N years.
Like a good physicist, of course, I immediately recognize that that N in the denominator gives us the opportunity to take the limit as N goes to infinity, effectively turning the sum of cuts into an integral. In which case, we can generate infinite economic growth. The tax rate will asymptotically approach ε, but the economy will increase without limit. Soon, we’ll control the economic resources of the entire Virgo cluster, and we’ll be able to build particle accelerators to probe the Planck scale using change found in the couch.
(Yes, I realize I'm posting a two-year old blog post.)
Comment