I disagree that the number is around 75%.
part of the reason of the parabolic nature of the graph is that people
will weigh the cost of work versus the cost of play. Those decisions
are made at _EVERY_ tax rate.
If you raise my taxes by 10%, for me to get the same level of disposable
income, I need to work more, but even though the extra work
brings in extra income, it cuts into my playtime, which has value (again
we will argue about how much value). If I choose to not work more,
my disposable income drops. I don't spend. The economy suffers.
Am I the only one who understands this?
On 4/14/2011 3:10 PM, Dick Martin wrote:
Yes. Yet at rates of 10% tax revenues are significant, at 25% tax
revenues are large, at 30% revenues are even larger. We know that from
experience.
There is some sort of curve that at a 0% rate raises zero $ and then by
the time it reaches a 100% tax rate raises zero revenue. In between
those extremes revenues are raised, so there must be a bell curve in
there somewhere, eh? Probably a misshapen bell curve, but still, a curve
that begins at zero, rises to some high point, and then later falls back
to zero.
That is the essence of the Laffer Curve.
The question is to when the curve turns down and tax yield begin to fall
with increasing rates. It is quite clear that we are no where near those
rates. Even by your example, you are talking about rates that are north
of 75%.
Tax cuts from 45% to 35% will do nothing but lower revenuers, and to
believe otherwise is just fanciful'
On 4/14/2011 2:44 PM, Gqcy wrote:
I would think we all could agree on the following:
If personal income taxes were zero, the government would
receive very little revenue from personal income taxes.
If personal income taxes were 100%, the government would
receive very little revenue from personal income taxes.
:)
-gerald
On 4/14/2011 2:18 PM, rick baird wrote:
The argument has always been that lower tax rates would stimulate the
economy, adding more tax payers and thus, increasing government
revenue. It was an interesting theory, but every time it's been
tried, it's been unsuccessful.
That is a patently untrue statement. While it is difficult to
differentiate cause and effect from economic cycles, there are plenty
of examples of tax rate decreases followed by revenue increases.
Perhaps there are externalities that
overwhelmed the theory, in which case the boundary conditions need to
be analysed.
I posted an analysis done by one of Obama's economic team a year or so
ago (she's no longer on board). It indicated that tax decreases can
increase revenues.
I've also posted graphs showing how revenues hover between 18 and 21%
of GDP, no matter what the rates are. The only way to explain that is
that people are less likely to put their money at risk by investing it
when the penalty for success is higher.
So, rather than a blanket 'lower taxes increase government revenue'
statement, we need to hear about under what circumstances lower taxes
will pay for themselves and more.
How about the inverse? That higher taxes don't necessarily increase
revenues.
The greatest indicator of higher tax revenues is economic growth - not
rates - high or low.
