Posted on 11/11/2013 5:48:56 AM PST by reaganaut1
Arguably, one of the biggest accomplishments of supply-side economist Art Laffer in the late 1970s and early 1980s was to get mainstream economists to take marginal tax rates seriously. We all knew that the deadweight loss from a tax is proportional to the square of the tax rate so that, say, doubling the tax rate quadruples the deadweight loss. But, for some reason, economists talked very little about this. And this was during an era when the top federal marginal tax rate on income in the United States was a whopping 70 percent and the top federal marginal tax rate on "earned" income was 50 percent.
But, in part due to Laffer, mainstream economists like Jerry Hausman of MIT started looking at the potentially large negative effects of high marginal tax rates on labor supply, especially the labor supply of married women.
Laffer's other big accomplishment was to get politicians, especially Republican politicians, to recognize the damage to incentives and, therefore, to real output, done by high marginal tax rates.
Many Republicans got sloppy though, advocating almost any kind of tax cut and often using supply-side rhetoric to justify such cuts.
Unfortunately, U.S. Senator Mike Lee from Utah now advocates a tax cut with a strong "anti-supply-side" component. According to Matthew Continetti of the Weekly Standard, Lee's "tax plan would simplify and reduce rates and offer a $2,500 per-child credit (up from $1,000 today) that would offset both income and payroll taxes." The "simplify and reduce rates" part, assuming I understand it correctly, is great. The problem is the $2,500 per child tax credit.
Why? This gets us to one of the points Laffer emphasized. Any cut in tax rates has two effects that offset: an income effect and a substitution effect.
(Excerpt) Read more at econlog.econlib.org ...
Unintended pun here but this is still just nibbling around the margins rather than the needed wholesale scrapping of the current law and the (un-Constitutional) 16th Amendment while adopting a Fair Tax/Flat Tax/999 plan that would remove the power to enslave (tax) from DC.
The way we tax manufacturing is insane and its something that every factory worker understands as they stop production and inventory everything in the shop every 3 months.
>> But the cut in marginal tax rates also increases the “price” of leisure. Every hour you don’t work, you’re giving up more real income because your net-of-tax income per hour has increased. So you’re inclined to work more. This effect is called the substitution effect. <<
Get back to work, SLAVES!!! The banking industry has learned you are starting to parent, and we will not have any of that!
See, because when you cut taxes on the wealthy, you only inspire them to work harder to buy Mazeratis and Crystal, but God forbid parents have spare time to raise their kids. We all know that the consumption of luxury goods makes everyone’s lives better, but raising kids well is totally useless, economically.
THIS is why Republican lose elections: because they tolerate idiots like this. If you give middle-class parents a tax cut, it will be wasted, but if you give the wealthy a tax cut, they’ll spend it usefully inflating bubbles in the stock market, the housing market, the bond market. This person, who deserves eternal torment from a vengeful god raping his ass with a pineapple until his ears bleed, just made a supervillain out of Art Laffer. For every idiot leftist who reads this, the name Art Laffer will no longer be associated with the guy who explained why governments can’t tax their way into prosperity, and will instead be associated with the guy who explained why the middle class must be held forever in servitude and near-poverty.
Boy, good way to save those (C) seats in Congress. Either ALL get a break, or none. Why is that so difficult?
Yet, not even heard (but easy to noodle): graduated Income tax = graduated slave tax. Income is the WORST way to tax.
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