The Redhunter

snake hunter said:

Nancy Pelosi had the best quote on these 2000+
page bills.."We've gotta pass this bill, to find out what's in it!" - reb
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The Dems have learned their lesson. They won't call the next bill a "stimulus bill" just as they didn't call the financial reform bill a "Bailout" bill.

The facts don't change even if the names do. And sadly, the "news" media will go along with the charade.

The Laffer Curve is a theory, extremely popular with supply side economists, drawn up on the back of a napkin at a dinner with Dick Cheney and Don Rumsfeld, way back in 1974 (according to your Heritage Foundation link). Note, this is a theory and when you look at data that has occurred since 1974, it doesn't stand the test of time:

According to the Independent (Wednesday, 27 May 2009 Johann Hari: Why are we silent as Cameron preaches voodoo economics?):

"From 1947 to 1964, the top rate of tax in the US was 91 percent. Using the Laffer Curve, the economy should have been in the tank – but in fact it was enjoying the longest sustained boom of the twentieth century. In the 1980s, Reagan slashed the top rate – but there was a severe recession in 1982, and the growth that followed was merely an average recovery. Then in 1993, Clinton increased the top rate of tax from 31 to 39.6%, and Laffer predicted an economic collapse. In fact, there was the next long boom. "

I know conservatives like to hold on to this notion that tax cuts = economic growth, but these fallacies sometimes don't hold water when you look at actual economic performance. We had one conservative who was steadfast in decreasing government spending during a steep recession. His name was Herbert Hoover, and many attribute the Great Depression to his contractionary economic polices.

And Mike, before we get carried away with revisionist history, the $700 billion financial bailout (partially used to fund CEO bonuses for those who drove their companies into the ground, but had "contractual agreements" ensuring huge compensation regardless of performance)was produced by the Bush administration. The recently passed reform bill has put a stop to the deregulation madness that allowed banks to loan out money to people with no-income and no job: through the CDO and derivative trading process.

As I tried to say in my post, sometimes tax cuts increase economic activity and sometimes they don't. It all depends on which tax you're talking about, how much you're talking about reducing the rates, and whether it's one-time or permanent(as permanent as anything).

It's silly to say that tax cuts always bring in more revenue or increase economic activity, and it's equally silly to say that they never bring in more revenue or increase economic activity.

jason said "The Laffer Curve...is a theory and when you look at data that has occurred since 1974, it doesn't stand the test of time"

Really? So if we increased income taxes to 99% it would bring in that much more revenue and would have no negative effect on economic activity? Or if we reduced rates to 1% it wouldn't increase economic activity?

Of course reducing tax rates can(see above) bring in more revenue. The argument is only over where we are on the curve, not whether it exists.

Uh, I never said increasing taxes to 99% would increase revenue, that is a straw man argument. My point is that the Laffer Curve theory is an academic theory that doesn't match economic data. Here is an article by a Google engineer who looks actual data (taxation rates and revenue) to look for a "laffer curve".

http://scienceblogs.com/goodmath/2007/07/a_laughable_laffer_curve_from.php

Look at the scatter plot of taxation and revenue from various countries. The data does not make any kind of curve. Australia and Germany have similar revenue ratios, but Germany has much lower corporate taxes than Australia. Their revenues should place them in the same tax range on the Laffer Curve, but they have very different tax rates (Australia is much higher). After looking at the data, I am unconvinced of this academic theory.

I am sure this will get more play as the Bush tax cuts begin to sunset....

Let me try again

All the Laffer Curve says is that if you keep increasing taxes there is a point whereby you start to take in less revenue.

You don't believe this.

Ok, so if we increase taxes from (as an example) 40 to 41 percent do you think we'll take in more revenue?

From 40 to 42 percent?
From 40 to 43 percent?
From 40 to 44 percent?
From 40 to 45 percent?
From 40 to 46 percent?
From 40 to 47 percent?
From 40 to 48 percent?
...
From 40 to 99 percent?

If you don't believe in the Laffer Curve than you believe that if we increase the rate to 99 percent we'll take in more money.
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But we're getting off track. Whatever one thinks about tax rates, I am damned if I will let them go up to fund Obama's insane spending programs. If for no other reason they need to be kept low in order to keep government spending low.

The problem in our country is not tax rates, but the level of government spending. Conservatives attacked the Bush Administration mercilessly over this issue, myself included. We only supported him in 2004 because John Kerry was so much worse.

Now we've gone from big-spender Bush and his Republivcan allies in the Congress to insane-spender Obama. At least Bush had as his justification "compassion," for Obama it is raw power. The guy hates private enterprise and individualism in general. He's not too fond of the United States either.

So if you want to dismiss the Laffer Curve I really don't care. I'm just don't want to give Obama and his Democrats additional revenue for their socialist schemes.