Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Laffer Curve Works Again
HUMAN EVENTS ^ | Dec 28, 2005 | Jerry Bowyer

Posted on 12/31/2005 8:45:33 AM PST by george76

Ronald Reagan once said an economist is someone who sees something that works in practice and wonders if it would work in theory.

So why is it that when confronted with a concept that works in both practice and theory, so many people refuse to believe it?

The Laffer Curve, popularized by economist Arthur Laffer, says the government can maximize tax revenue by setting the tax rate at ...

The logic is obvious on the ends of the spectrum: if the tax rate is 0%, the government collects no money.

If it is 100%, people have no reason to earn, and the government still collects no money.

Federal tax receipts for October and November (the first two months of fiscal 2006) were $288 billion. This is up from the first two months of fiscal 2005 ...

Despite cutting tax rates in May 2003, tax receipts for this two-month period have risen for three consecutive years.

We were on the wrong side of the curve (and may still be):

Tax rates were too high.

(Excerpt) Read more at humaneventsonline.com ...


TOPICS: Business/Economy; Front Page News; Government; News/Current Events; Politics/Elections; US: District of Columbia
KEYWORDS: bush; bush43; economicnews; economics; economist; growingeconomy; laffer; laffercurve; reagan; ronaldreagan; tax; taxes; taxrates; taxrevenue
Navigation: use the links below to view more comments.
first previous 1-20 ... 81-100101-120121-140 ... 161-170 next last
To: Ghost of Philip Marlowe

"Allowing the government to impose tariffs that restrict our freedom to choose, freedom to purchase and invest in what we want, is hardly being a "flexible economy." That is the tactic of the centrally managed economy so adored by Socialists."

So you're saying that from about 1790 to 1960 our country was a centrally managed ecomomy adored by socialists? You do realize that most of the protectionism that is proposed now by Buchanan and others is a weak version of what the United States used over that 170 years? Sorry, but "free trade" is only a very recent episode in US history. Protectionism and limited, controlled immigration has been the rule through most of our nation's history. And during that period we rapidly led the world in technology, medicine, wages, and standard of living. Most of our powerful industrial base existed with the considerable assistance of protectionist insulation. So it can definitely be said that without protectionism, we would not have had the industrial base capable of challenging Germany and Japan during WWII.


101 posted on 01/01/2006 11:23:42 AM PST by neutronsgalore (Waffling George has failed to secure the borders...now it's Bouncing Betty's turn!)
[ Post Reply | Private Reply | To 97 | View Replies]

To: fallujah-nuker

PING!


102 posted on 01/01/2006 11:27:56 AM PST by neutronsgalore (Waffling George has failed to secure the borders...now it's Bouncing Betty's turn!)
[ Post Reply | Private Reply | To 101 | View Replies]

To: Willie Green
Thomas Sowell isn't much of a sailor. He's so confused that he doesn't even understand that we're not in the same boat with other nations.

That was simply pathetic. Jealousy is an ugly thing. Very ugly.


103 posted on 01/01/2006 11:28:00 AM PST by rdb3 (This is a ch__ch. What's missing?)
[ Post Reply | Private Reply | To 88 | View Replies]

To: Cacique
This isn't about convincing Leftists. It's about rescuing the American voter from the influence of the Leftists. I don't know what you intended to accomplish by posting defeatism, but it's only the Left that benefits from it.
104 posted on 01/01/2006 11:48:39 AM PST by inquest (If you favor any legal status for illegal aliens, then do not claim to be in favor of secure borders)
[ Post Reply | Private Reply | To 100 | View Replies]

To: CPOSharky

The real curve [as opposed to its theoretical simplification] might well be more complex and have some local minimums and maximums. More, the position of these can be shifting with time, as both structure and type of underlying economy changes. Thus, even when the optimal taxation rate has been found by trial and error, there is no guarantee that it will be the right taxation rate five years down the road. Thus there'll be no end to trial and error search.


105 posted on 01/01/2006 11:51:43 AM PST by GSlob
[ Post Reply | Private Reply | To 5 | View Replies]

To: inquest
revenue goes up (it did).  And why hasn't Bush been shouting that fact from the rooftops at every opportunity?

GW has done so many things right, but he's foolishly expected his results to speak for themselves.   He's been wrong to think that very many people can read anything more complicated than a bumper sticker.  Sure, he's won a big following with the internet crowd, and we're a group that's gaining power all the time.  That doesn't change the fact that he's getting paid to do more than apologize for bad things whether it was his fault or not .  I say it's high time that he starts reporting with unmistakable clarity all the good things that he's done.



106 posted on 01/01/2006 12:19:57 PM PST by expat_panama
[ Post Reply | Private Reply | To 99 | View Replies]

To: inquest

Good point.

"it's not a tax on the wealthy; it's a tax on those trying to get wealthy."

The Teresa Heinz Kerry folks with Trust Funds hide allot of their cash off-shore in foreign banks and in other clever places ( like Muni-bonds ). They pay little to no American taxes.

The growing middle class does not have that luxury. The alternative minimum tax with no inflation indexing is growing every year.


107 posted on 01/01/2006 12:20:49 PM PST by george76 (Ward Churchill : Fake Indian, Fake Scholarship, and Fake Art)
[ Post Reply | Private Reply | To 83 | View Replies]

To: grey_whiskers
"Giving money to the government is like giving whiskey and car keys to a 15 year-old Kennedy.

More appropriate in light of your tag line...

Cheers!

True but I have to admit that I stole the line about the 15 year-old from PJ O'Rourke

108 posted on 01/01/2006 12:35:46 PM PST by muir_redwoods (Free Sirhan Sirhan, after all, the bastard who killed Mary Jo Kopechne is walking around free)
[ Post Reply | Private Reply | To 94 | View Replies]

To: george76
Everyone should reread the very first sentence of the Human Events column. The Laffer curve is used to describe what happens in realife with tax rates. It is not meant to be used as a tool to discover the "ideal" tax rate. The curve printed in several posts above is not the actual curve of current rates and revenue, but it is useful to show the relationship between tax rates and tax revenue.

As for anyone wanting to use the tax rate to manage the growth of the economy - that is simply Keynesian tomfoolery. Tax rates are part of the FISCAL tools available for use by the government, but their affects are often deleterious when used for short term goals. The reason for this is that by the time any economic analysis is performed on our large economy, the macro forces are too far down the road to bring them back where they can be managed. Add in the fact that the tax rate would affect future cash flows not yet known, the prescription could be worse than the illness. Just imagine what would have happened if we had a tax increase on 9/10/01 - do you the think the democrats would have rescinded it???

Monetary policy, as determined by the fed, is much more useful in the realm of inflation and economic growth because the tools used are immediately implemented against trailing data. That said, the effects are sometimes felt as much as 18 months after the policy is implemented.

Just put the idea of adjusting the tax rate to affect the economy out of your mind - its not only a bad idea, its stupid.

109 posted on 01/01/2006 12:47:35 PM PST by Lowcountry (RIP: Peterdanbrokaw)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Mr Ramsbotham

To which I'd respond by asking whether they would be content to work for no pay. The point was always driven home.>>>>>>>>>>>>>

Interesting illustration, of course most of us would go home well before the tax rate hit 100 percent. I wonder what the true tax rate is in this country if all categories could be calculated and accounted for as to how they affect the wage earner, keeping in mind that the old saw that unemployment taxes and half of social security and medicare are paid by the employer are only accounting gimmicks dictated by the government to hide the truth. I suspect we are a lot closer to total slavery then most people ever suppose.


110 posted on 01/01/2006 1:07:34 PM PST by RipSawyer (Acceptance of irrational thinking is expanding exponentiallly.)
[ Post Reply | Private Reply | To 21 | View Replies]

To: DakotaGator

I believe that all levels of government should be kept on an almost starvation revenue. >>>>>>>>>

Absolutely, I want to be able to count the ribs through a shirt.


111 posted on 01/01/2006 1:11:15 PM PST by RipSawyer (Acceptance of irrational thinking is expanding exponentiallly.)
[ Post Reply | Private Reply | To 29 | View Replies]

To: george76

"In 1930, the Republican-controlled House of Representatives, in an effort to alleviate the effects of the... Anyone? Anyone?... the Great Depression, passed the... Anyone? Anyone? The tariff bill? The Hawley-Smoot Tariff Act? Which, anyone? Raised or lowered?... raised tariffs, in an effort to collect more revenue for the federal government. Did it work? Anyone? Anyone know the effects? It did not work, and the United States sank deeper into the Great Depression. Today we have a similar debate over this. Anyone know what this is? Class? Anyone? Anyone? Anyone seen this before?"

112 posted on 01/01/2006 1:15:13 PM PST by presidio9 (Islam is as Islam does)
[ Post Reply | Private Reply | To 1 | View Replies]

To: HardStarboard
If spent wisely and with intelligent priorities and fiscal restraint, 13% should be about the right number for the U.S.

I agree that a lower amount should be sufficient, but don't agree that it should be based on a percentage. This is where the government has difficulty planning as well as contstraint.

I suggest that we have a "residency fee" for anyone staying over 30 days and prorated per day after that. Find out what the actual bills are for the necessary programs of the government and divide that amount by the number of EVERY living person in the country. This way, everyone pays the same amount and every addition to our handouts would really affect every person, thus reducing the size of all handouts. Workers deserve to know how much they would have to pay each year based on real governmental costs- Now you have no idea exactly how much you'll have to pay until your tax-return is accepted by the IRS. And, even then, you are subject to audits and changes years later. I'd much rather have the 13 percent tax, as you suggested, than what we have now.

113 posted on 01/01/2006 1:19:31 PM PST by DilJective (Proudly serving in the US Army)
[ Post Reply | Private Reply | To 60 | View Replies]

To: george76

We need a Laffer curve to explain to some of the management types that a lower wage rate does not AUTOMATICALLY translate to a lower unit labor cost! I have been working at the same job for three years because at my age I cannot get an interview for anything in line with my abilities and I must keep medical coverage for my wife. I have seen good people leave and seen new people hired a couple of months later for two cents an hour MORE than the person who left was earning. The pathetic part is that at least two of those who left were super productive and possessed skills that will not be learned by a new hire in less than two years if we are lucky. In most cases they will not be able to hire anyone who will EVER be as good as the two I am referring to. A two dollar an hour increase would probably have kept both of these men working and would have been far less expensive than trying to replace them. It will take at least THREE good people to do what these TWO were doing. You can't hire enough average people to do what they were doing. In my humble opinion one of the major problems with American industry is that there is no incentive for people who truly excel in everyday job categories. At least there isn't in the place where I work.


114 posted on 01/01/2006 1:25:46 PM PST by RipSawyer (Acceptance of irrational thinking is expanding exponentiallly.)
[ Post Reply | Private Reply | To 43 | View Replies]

To: RipSawyer
...I want to be able to count the ribs through a shirt.

I like it!

115 posted on 01/01/2006 1:43:40 PM PST by DakotaGator
[ Post Reply | Private Reply | To 111 | View Replies]

To: Willie Green

I should have used "Chinese moonshine" or saki or maybe Bombay gin so as not to be misunderstood. Maybe we can all light out for the territory to be free from working for over a decade for nothing.


116 posted on 01/01/2006 2:10:37 PM PST by Simo Hayha (An education is incomplete without instruction in the use of arms to protect oneself from harm.)
[ Post Reply | Private Reply | To 93 | View Replies]

To: RipSawyer

The Laffer Curve is a good tool for lots of reasons.

Productivity of a business is often increased by offering a bonus or other benefit. Not just for faster work, but for smarter work with new ideas, new equipment and/or software.

I agree that the lowest cost price is often more expensive in the long run.


117 posted on 01/01/2006 2:14:06 PM PST by george76 (Ward Churchill : Fake Indian, Fake Scholarship, and Fake Art)
[ Post Reply | Private Reply | To 114 | View Replies]

To: presidio9
"In 1930, the Republican-controlled House of Representatives, in an effort to alleviate the effects of the... Anyone? Anyone?... the Great Depression, passed the... Anyone? Anyone? The tariff bill? The Hawley-Smoot Tariff Act? Which, anyone? Raised or lowered?... raised tariffs, in an effort to collect more revenue for the federal government. Did it work? Anyone? Anyone know the effects? It did not work, and the United States sank deeper into the Great Depression. Today we have a similar debate over this. Anyone know what this is? Class? Anyone? Anyone? Anyone seen this before?"

You know you won't receive an answer. But your point is spot on.


118 posted on 01/01/2006 2:22:58 PM PST by rdb3 (This is a ch__ch. What's missing?)
[ Post Reply | Private Reply | To 112 | View Replies]

To: rdb3

Interesetingly enough, the current President's father referred to this as "something- D.O.O. economics." Anyone? Anyone?

Disclaimer- I am not a hugh fan of GHWB.


119 posted on 01/01/2006 2:26:56 PM PST by presidio9 (Islam is as Islam does)
[ Post Reply | Private Reply | To 118 | View Replies]

To: presidio9
Interesetingly enough, the current President's father referred to this as "something- D.O.O. economics." Anyone? Anyone?

He called it "voodoo economics."


120 posted on 01/01/2006 2:32:36 PM PST by rdb3 (This is a ch__ch. What's missing?)
[ Post Reply | Private Reply | To 119 | View Replies]


Navigation: use the links below to view more comments.
first previous 1-20 ... 81-100101-120121-140 ... 161-170 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson