http://www.weeklystandard.com/art-laffer-trump-should-win-easily/article/2003371
The central theme here is that the individual can plan and spend their money better than the gov’t can. The Laffer Curve says that there are two tax rates that produce the same tax income to the gov’t. One rate, say 17%, is low enough to induce individuals to go out, work, innovate, and get the economic engine going again. Another rate, say 70%, will produce exactly the same income for the gov’t because now it pays to hire lawyers to avoid paying taxes, discourage workers from going back to work because so little is left it’s not worth the effort, and the reward to investing is too small to take the risk.
This is not some pie-in-the-sky theory. It’s worked in the US, India, and Great Britain. Taxes distort the allocation of resources in every case where there are deductions to be had. A 17% flat (not Fair) tax with no deductions would raise the same amount of tax revenue we see now, but without the allocative effects. Also, you could file your tax return on a postcard instead of reading through 27,000 pages of tax code that even the IRS can’t give you a consistent answer to if you ask a question.
It ludicrous to hear politicians bitch about how the tax code favors the rich. Come on, guys...who the hell do you think wrote the code?
People like Arthur Laffer have rightly observed that there is a marginal tax rate that produces the greatest level of government revenue. When the tax rate is above that number, reducing the rate actually results in more revenue. It is interesting to note that socialists (er, “progressives”) always seem to agitate for a higher rate, no matter where the optimum is. Conservatives tend to lobby for a lower rate.
(Neither party seems to care about the Rahn Curve, which indicates that when the total tax burden exceeds about 20%, people change their behavior to reduce the amount of taxes they pay. This is the psychological point where leisure starts to become more valuable than work.)
Having said this, the entire discussion misses the most important issue. Here in the land of the (stilll somewhat) free, our government was instituted in order to “secure the blessings of liberty.” The bigger that government becomes, the less liberty it can allow us to have, if only that we must work more hours in a month to pay for it.
So similar to the Laffer Curve, the Liberty Curve has zero liberty when we have 100% government (like in North Korea) and zero liberty at 0% government (like in Samolia).
Our goal as citizens must NOT be to tune the tax tables to optimize government revenues and thus government’s intrusion in our lives, it must be to tune the size and scope of government in order to optimize our liberty.
While the Laffer Curve is useful for this purpose, but we must pay more attention to the Liberty Curve instead.