Even in those terms, I think that the Laffer curve is too simplistic to describe the economics of taxation with very much accuracy. For one thing, there are other factors besides the top marginal tax rate that effect revenues. Some of those factors include the the lower income limit to which that top marginal rate applies, the other tax brackets in effect, and the ease with which taxpayers can take advantage of various deductions and tax loopholes to avoid higher rates. None of these other factors are indicated by the Laffer curve.
If you do, please tell me where on the curve you'd want to plot current revenue. If you don't, I'd be grateful if you could tell me where and why the plot would show reversing/negative slopes.
Because of the above listed limitations of the Laffer curve and the lack of enough historical data for any serious statistical analysis, I don't think it possible say exactly where we are on the curve. However, all of the data in the aforementioned analysis suggests that the Reagan and Bush tax cuts caused revenues to be lower than they would have been and that the Clinton tax hike caused revenues to be higher. That would suggest to me that, under our current tax structure, a top marginal rate in the 30 to 40 percent range is to the left of the "Equilibrium Point" in the Laffer curve shown in post #5, at least in the short to medium-term.
We don't need accuracy. Another word for simplicity is elegance.
You said the endpoints are correct. There are two possibilities for the points in-between, one is that there is at least one maximum revenue point greater than zero; the second possibility is all in-between revenue is zero or negative. I can demonstrate historical cases where the first possibility is more realistic. Unless you can explain the how the second possibility exists, then current federal revenue has to be
| 1. | way to the left of the max | |
| 2. | near the max | |
| 3. | far to the right. |
Bowyer shows how increased revenue has followed tax-cuts. This suggests that revenue rates have been in excess of maximum. While it is always possible to offer conjecture for alternate causes, serious fiscal policy must conform to observable reality and not to conjecture.
Consider also the consequences. We can cut tax rates more; if revenue continues to increase then we are successful. Even if revenue were to decrease then we can always tax the increased wealth. However if we were to increase tax rates and find revenue falling with shrinking wealth, then we're stuck with a larger deficit and a savaged economy. The responsible, sensible choice is a further reduction in tax rates.