The Laffer Curve Bends at an 80% Rate of Income Tax

Discussion in 'Economy' started by Toro, Dec 4, 2010.

  1. Toro
    Offline

    Toro Diamond Member

    Joined:
    Sep 29, 2005
    Messages:
    50,732
    Thanks Received:
    11,051
    Trophy Points:
    2,030
    Location:
    The Big Bend via Riderville
    Ratings:
    +25,065
    That is the conclusion made by three economists who looked at a highly-mobile group of top earners - professional soccer players - who earn a high amount in a short period of time and thus should be highly sensitive to income tax rates.

    Stumbling and Mumbling: Laffer curves for footballers
     
    • Thank You! Thank You! x 1
    Last edited: Dec 4, 2010
  2. Revere
    Offline

    Revere BANNED

    Joined:
    Jan 23, 2010
    Messages:
    7,427
    Thanks Received:
    415
    Trophy Points:
    0
    Location:
    Watching you in my profile page
    Ratings:
    +415
    Well, it's 80% or lower.
     
  3. boedicca
    Offline

    boedicca Uppity Water Nymph Supporting Member

    Joined:
    Feb 12, 2007
    Messages:
    41,789
    Thanks Received:
    12,771
    Trophy Points:
    2,250
    Location:
    The Land of Funk
    Ratings:
    +22,761
    The study is of professional soccer players. They are hardly representative of the general economy.

    The paper consists of three main parts. The first part presents reduced-form graphical
    evidence showing clear effects of taxation on migration. We start by considering cross-country
    correlations between (a) the tax rate on foreign players and the fraction of foreigners in the
    national league, (b) the tax rate on domestic players and the fraction of native players playing
    in their home league, and (c) the tax rate on local players and the performance of first-league
    teams in the country (in a Europe-wide ranking of teams).


    And it appears that you are misrepresenting the study:

    To provide conclusive evidence, we turn to quasi-experimental evidence from (a) preferential
    tax schemes to foreigners in Belgium, Denmark, and Spain, (b) a cohort-based tax reform
    in Greece. In each case, we show compelling graphical evidence that international mobility
    responds to taxation.
     
    • Thank You! Thank You! x 1
    Last edited: Dec 4, 2010
  4. Revere
    Offline

    Revere BANNED

    Joined:
    Jan 23, 2010
    Messages:
    7,427
    Thanks Received:
    415
    Trophy Points:
    0
    Location:
    Watching you in my profile page
    Ratings:
    +415
    And it only has one data point, an 80% effective tax rate. Not a 70% rate. Or a 60% rate.
     
  5. Toro
    Offline

    Toro Diamond Member

    Joined:
    Sep 29, 2005
    Messages:
    50,732
    Thanks Received:
    11,051
    Trophy Points:
    2,030
    Location:
    The Big Bend via Riderville
    Ratings:
    +25,065
    They are representative of high earners. High earners are never representative of the general economy.

    Not only are they representative of high earners, they are generally more mobile than high earners in most professions, and are more motivated because they only earn that money in a short period of time.
     
  6. Toro
    Offline

    Toro Diamond Member

    Joined:
    Sep 29, 2005
    Messages:
    50,732
    Thanks Received:
    11,051
    Trophy Points:
    2,030
    Location:
    The Big Bend via Riderville
    Ratings:
    +25,065
    Because the Laffer Curve only bends at one rate.
     
  7. Revere
    Offline

    Revere BANNED

    Joined:
    Jan 23, 2010
    Messages:
    7,427
    Thanks Received:
    415
    Trophy Points:
    0
    Location:
    Watching you in my profile page
    Ratings:
    +415
    But since the tax in the UK is 80%, nobody knows whether they'd move if it were 50% or 60% or 70%.
     
  8. boedicca
    Offline

    boedicca Uppity Water Nymph Supporting Member

    Joined:
    Feb 12, 2007
    Messages:
    41,789
    Thanks Received:
    12,771
    Trophy Points:
    2,250
    Location:
    The Land of Funk
    Ratings:
    +22,761

    Soccer players may move among established, cross border leagues. They accept such mobility as a career choice.

    Not all careers have such a marketplace for their skills.

    A more valid study would be among small businesses - i.e., the people who create jobs for other people, or not if they don't believe they will receive a proper return for their risk taking.
     
  9. boedicca
    Offline

    boedicca Uppity Water Nymph Supporting Member

    Joined:
    Feb 12, 2007
    Messages:
    41,789
    Thanks Received:
    12,771
    Trophy Points:
    2,250
    Location:
    The Land of Funk
    Ratings:
    +22,761

    B'loney.

    This study does not empirically prove that.
     
  10. Toro
    Offline

    Toro Diamond Member

    Joined:
    Sep 29, 2005
    Messages:
    50,732
    Thanks Received:
    11,051
    Trophy Points:
    2,030
    Location:
    The Big Bend via Riderville
    Ratings:
    +25,065
    No, the tax rate is not 80% in Britain. It is an econometric model.
     

Share This Page

Search tags for this page

operating on the left side of revenue maximization along the laffer curve means