Kos: Tax Cuts Raise Revenue COMPLETELY DEBUNKED

[Coexist]

I am no economist - but this seems to make sense - can anyone here more knowledgeable support/debunk this?

http://www.dailykos.com/storyonly/2006/2/13/8171/42456
<snip>
The editorial pages of the Wall Street Journal originally started to advance this idea in the mid to late 1970s. The idea is based on a graph drawn by Paul Laffer (reportedly on a cocktail napkin) and is usually represented by a simple semi-circle. The horizontal line represents tax rates and the vertical line represents tax revenue. The curve's central idea is there is an optimal level of taxation, represented by the semicircle's apex. It the level of taxation is above or below the apex, tax revenue will be lower than the theoretical optimal level.
<snip>
The underlying assumption is taxes are always too high. The assumption of all Republican ideologues is taxes are always to the right of the semicircle's apex. Therefore, lowering taxes will increase revenue. What they forget to mention is according to the Laffer curve, if tax rates are left of the apex, lowering taxes could also decrease revenue. Because there is no way to extrapolate any "laffer" curve from any data there is no way prove or disprove the underlying assumptions of any tax increase or decrease. Because it is easier to sell tax cuts instead of tax increases, the assumption that rates are to the right of the apex fits in with a marketing plan, but has no basis in any actual evidence.
<snip>
The total overall increase in tax revenue under Regan was 40.70%. Compare Reagan's increase to the Clinton administration's increase of 97% (from 509.7 billion in 1993 to 1.004 trillion in 2000) which raised taxes on upper-income taxpayers. Again, this bolsters the argument US tax rates are to the left of the laffer curve apex because a tax increase increased tax revenue.

<snip>
The two attempts to prove "tax cuts pay for themselves" have failed. It is clear that if the laffer curve exists, the US tax rates are clearly to the left of the curve's apex indicating a tax cut will in fact decrease revenue

[Lasher]

1. Aha, one of my favorite subjects

Here is an article that I wrote on the subject last year:

http://modernamerica.blogspot.com/2005/06/supply-side-economics.html

[Coexist]

4. wonderful article - thank you.

[HereSince1628]

2. That pretty much parallels what I posted a couple days ago

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=132&topic_id=2452263&mesg_id=2452305


Right down to the mention of the napkin. Clearly I tapped into a stream of consciousness running through the 11th dimension.

[Coexist]

6. Great minds do think alike, huh.

thanks.

[bananas]

7. LOL

see my responses
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=132&topic_id=2452263&mesg_id=2456552
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=132&topic_id=2452263&mesg_id=2456558
http://ase.tufts.edu.nyud.net:8090/cogstud/graphics/tempfig4.gif

[Coexist]

8. oh my - that is too funny

thanks for finding the napkin sketch of a lifetime.

[JNelson6563]

3. It's a lot like "Iraq will pay for itself"

with all the money we, er, they make from the oil!

Their bullshit reasons are always devised to cover up one thing, large profits for them and theirs. As long as the lie holds long enough to rake in a mountain or two of wealth, who cares after that?

Julie

[papau]

5. very true - I used Reagan and Carter to illustrate this point in the past

Carter's GDP rate of growth over his term was very close (albeit 0.1% less) to Reagan's 8 year rate of growth.

The rate of tax growth under Reagan was only 70% of that under Carter.

Seems straight forward, if the Laffer curve exists, we are at a point where higher tax rates mean more revenue.

By the way - the dots on the napkin had no connection to any curve that could be seen by the eye or by math. Laffer just drew the curve to suggest his theory.

And now conservative economists actually teach the damn pretend curve!

[Roland99]

9. Anyone remember Ben Stein's character from Ferris Beuller?

:)

"blank economics"..."voodoo economics"



But, I believe it was in 2003 that the tax revenues were the lowest as a % of GDP than had been in the last 40 years.

[freedomfries]

10. k & r

good info! thanks for posting.

[rateyes]

11. Seems that...

Taxation under Clinton years was at the Apex....

[Coexist]

12. and so was revenue - so it stands to reason...

[rateyes]

13. Yeah, if the curve theory is correct....

then seems like we figured it out, and ought to repeal the tax cuts...at least on the wealthy.

[Coexist]

14. yes, making those permanent would be tragic

How, by the way, do you make them Permanent? Can they NEVER be reinstated??? or does that just mean they will extend them past their expiration date?

[rateyes]

15. They're Republicans...

they never mean what they say!

[Hosnon]

16. Any Economist out there that can verify this? Sounds pretty reasonable

on its face to me...

Any mathematical verifications for the existance of the curve?

[Wilms]

17. K&R n/t

[Buns_of_Fire]

18. Aha! NOW I know what the famous "Laffer Curve" is!

Thank you! :thumbsup:

In my heart, I KNEW it probably didn't have anything to do with "Leisure Suit Larry in the Land of the Lounge Lizards" (it's an old role-playing computer game, for you young'uns out there)...