.jpg)
A table in last Thursday's USA Today (from Moody's Analytics) showed clearly how much a Federal dollar injected into the economy returns in economic growth. Here's a scan of the table.
So why does it matter, you ask? Because our learned political leaders from the GOP are once again (or still) going on about how tax cuts are always better for the economy. They also always make the point that tax cuts increase tax revenues. No, I'm not making that part up. Conservatives have for some years now relied upon something called the Laffer Curve to justify never raising, and always lowering, taxes. Click the link for a definition. The basic idea is that at a certain economic point an increase in tax rates will cause changes in economic behavior such that tax revenues will actually go down. Of course, the curve has two sides. The believers in this fairy tale never seem to look at the side that says an increase in tax rates will result in an increase in revenue. They just get up on their hind legs and go on about taxes taking away our liberty and the conversation tends to end.
Well, I was going to go into chapter and verse on this issue when a posting by former Bush administration member Bruce Bartlett stopped me cold. He got there first. This post is worth a read. It lays out the thoughts of some GOP and conservative economists who call the Laffer Curve assertions the A-1 prime BS that it is.
So the question we must ask is, what can we do about politicians who spout off about ideas that just are not true? Throw all of the bums out? The trouble is, some of the new bums believe this crap too. And don't get me started on the press!
Note: I would really love to hear from my conservative readers on the Laffer Curve issue. A good conversation is never a bad thing.
3 comments:
I think the concept of the Laffer Curve has some validity, at least theoretically. The curve is cited for the proposition that if taxes are lowered, that will stimulate production, increase profit and increase net tax revenue. With a zero tax rate, obviously you’re going to have zero revenue, so the left side of the curve is tacked down tightly. And if you’re dealing with rational people, and taxing them at 100%, you’re going to have zero tax revenue so the right side of the curve will be welded to the baseline. And, obviously, if you tax people on income at a some rate in between, they’re going to pay something, so there will be some sort of revenue bump in the middle. What the bump will look like is open to discussion.
Personally, I doubt if the bump is the beautiful curve set forth in economic texts and articles on economics. Mind you, my own knowledge of economics is very dated, but I just mistrust simple things. I rather imagine that the Laffer Curve if it could be seen in the real world would be weighted toward the right side, rather like the curve about the warp engine drive in Star Trek – but that’s just my feeling, I have absolutely no experiential data and I don’t know of any way to obtain any. There is no way to isolate the effects of the tax rate on revenue from the forest of other factors which affect total tax revenue. We do not have “a tax rate,” we have progressive taxation at several rates, flat rate taxes on other things (such as business and occupation taxes), sales taxes, estate taxes, gift taxes, we have a grey economy which changes tone based on overall economic conditions, we have a horde of lobbyists who assist the “ladies” of the Great Marble Whorehouse in carving out deductions, exemptions and credits, and we never have and never will see the conditions to test the Laffer Curve.
What good is it? Well, it’s easy. This easy explanation is good for “conservatives,” but the quest for Romper Room is politically universal. The favorite political mantra of anyone with a small mind and a big ego is “It’s easy, all you have to do is . . .” That’s not conservative or liberal, that’s lazy and unrealistic.
Can anyone both intelligent and candid ever get elected to office?
I'd like to post a link to you on my blog, www.no3equitycourt.blogspot.com, with your permission.
RC
I think the concept of the Laffer Curve has some validity, at least theoretically. The curve is cited for the proposition that if taxes are lowered, that will stimulate production, increase profit and increase net tax revenue. With a zero tax rate, obviously you’re going to have zero revenue, so the left side of the curve is tacked down tightly. And if you’re dealing with rational people, and taxing them at 100%, you’re going to have zero tax revenue so the right side of the curve will be welded to the baseline. And, obviously, if you tax people on income at a some rate in between, they’re going to pay something, so there will be some sort of revenue bump in the middle. What the bump will look like is open to discussion.
Personally, I doubt if the bump is the beautiful curve set forth in economic texts and articles on economics. Mind you, my own knowledge of economics is very dated, but I just mistrust simple things. I rather imagine that the Laffer Curve if it could be seen in the real world would be weighted toward the right side, rather like the curve about the warp engine drive in Star Trek – but that’s just my feeling, I have absolutely no experiential data and I don’t know of any way to obtain any. There is no way to isolate the effects of the tax rate on revenue from the forest of other factors which affect total tax revenue. We do not have “a tax rate,” we have progressive taxation at several rates, flat rate taxes on other things (such as business and occupation taxes), sales taxes, estate taxes, gift taxes, we have a grey economy which changes tone based on overall economic conditions, we have a horde of lobbyists who assist the “ladies” of the Great Marble Whorehouse in carving out deductions, exemptions and credits, and we never have and never will see the conditions to test the Laffer Curve.
What good is it? Well, it’s easy. This easy explanation is good for “conservatives,” but the quest for Romper Room is politically universal. The favorite political mantra of anyone with a small mind and a big ego is “It’s easy, all you have to do is . . .” That’s not conservative or liberal, that’s lazy and unrealistic.
Can anyone both intelligent and candid ever get elected to office?
I'd like to post a link to you on my blog, www.no3equitycourt.blogspot.com, with your permission.
RC
Did I mention that I'm still incompetent on the computer?
Post a Comment