Where does the Laffer Curve Bend?

[antagon]

Most people do not realize the percent of, or add up all the taxes they pay every year from their earnings. Medicare, SS, Federal, State, County, City, Healthcare, License, Sales Tax, Real-estate Tax, Personal Property Tax, Automobile Tax, Phone Taxes, Gas Tax, Utility Tax's, Permit Fees, Mandatory Unemployment Insurance, Mandatory Auto Insurance, Mandatory Healthcare Insurance, Sin Taxes.

Not to mention Government Fines & Penalties or Bank/Credit/Debit Exchange Fees or interest if you are in debt.

The average worker is paying well over 70% of their earnings out to someone who spends it for them & they don't even realize it. The Gold barter trade system is looking very very good to me!

one of the flaws of the laffer curve is the lack of specificity with which it was proposed. it is a model which doesn't account for the varied taxation causes which you put forward. their confusing nature alone is just one device which accounts for the real impact of a tax rate, and the laffer curve is based on impact and perception, rather than the rate itself.

furthermore, laffer's not accounted for the role of government expenditure in such a simple curve. the willingness for industry to support a self-interested and exclusive oligarchy is dramatically different than one which invites lobbying and capture, or which prioritizes investment back into the wider economy.

which rate? trick question. false premise.

 

[topspin]

Just above my income level taxes are bad below $128,000

 

[Truthmatters]

Tax cuts increase tax collections



Myth: Tax cuts increase tax collections.

Fact: Tax cuts decrease tax collections.




Summary

There is no evidence whatsoever that tax cuts increase tax collections. Almost always, tax cuts have seen tax collections fall in the following years; tax hikes have seen tax collections rise in the following years. Which is about what you would expect!



Tax cuts in recent history

Since World War II, federal tax receipts have fluctuated within a few points of 18 percent of the Gross Domestic Product. Because they have been so stable, tax collections have regularly grown with the economy. Almost always, the only drops in tax collections have been during recession years; otherwise, tax collections have expanded in the years that the rest of the economy expanded.

There are a few notable exceptions to the above rule: those periods following large tax cuts.After Reagan's income tax cuts took effect in 1982, real income tax collections took a long fall, despite the fact our economy continued to grow . For the moment, let's ignore the fact that tax collections could have been expected to grow after 1981. Let's simply use 1981 as a baseline, multiplying it 8 times, and compare that to what was really collected over the next 8 years.

 

[Paulie]

Tax cuts increase tax collections



Myth: Tax cuts increase tax collections.

Fact: Tax cuts decrease tax collections.




Summary

There is no evidence whatsoever that tax cuts increase tax collections. Almost always, tax cuts have seen tax collections fall in the following years; tax hikes have seen tax collections rise in the following years. Which is about what you would expect!



Tax cuts in recent history

Since World War II, federal tax receipts have fluctuated within a few points of 18 percent of the Gross Domestic Product. Because they have been so stable, tax collections have regularly grown with the economy. Almost always, the only drops in tax collections have been during recession years; otherwise, tax collections have expanded in the years that the rest of the economy expanded.

There are a few notable exceptions to the above rule: those periods following large tax cuts.After Reagan's income tax cuts took effect in 1982, real income tax collections took a long fall, despite the fact our economy continued to grow . For the moment, let's ignore the fact that tax collections could have been expected to grow after 1981. Let's simply use 1981 as a baseline, multiplying it 8 times, and compare that to what was really collected over the next 8 years.

Why do you constantly involve yourself in topics that are obviously so far beyond your scope of intelligence?

 

[Truthmatters]

The laffer curve is a myth and laffer himself has said so

 

[Toro]

If there is a 100% tax rate there will be no taxes to spend or contribute to the economy because people will not earn or pay taxes if they get nothing in return.

Again, that's not true. If it were true, then communist nations would have zero revenue. But clearly, that wasn't the case. I've known many people who worked behind the Iron Curtain who were highly educated and worked hard.

Now, of course, a free market system works much better, and the government does collect more tax revenues when the tax rate is below 100%. But it is factually wrong to say that a government collects no revenues at a 100% taxation rate.

 

[KissMy]

If there is a 100% tax rate there will be no taxes to spend or contribute to the economy because people will not earn or pay taxes if they get nothing in return.

Again, that's not true. If it were true, then communist nations would have zero revenue. But clearly, that wasn't the case. I've known many people who worked behind the Iron Curtain who were highly educated and worked hard.

Now, of course, a free market system works much better, and the government does collect more tax revenues when the tax rate is below 100%. But it is factually wrong to say that a government collects no revenues at a 100% taxation rate.

Obviously the government in their system unlike a tax provided all goods & services to their workers like a bartering business in exchange for their work. The only service I get from government is state roads. I pay my own retirement, housing, utilities, food, health-care, auto & any other item I need or want. I am way overtaxed for the services my government provides me. I would not & could not live or work based upon the scraps this government provides me.

 

[william the wie]

If there is a 100% tax rate there will be no taxes to spend or contribute to the economy because people will not earn or pay taxes if they get nothing in return.

Again, that's not true. If it were true, then communist nations would have zero revenue. But clearly, that wasn't the case. I've known many people who worked behind the Iron Curtain who were highly educated and worked hard.

Now, of course, a free market system works much better, and the government does collect more tax revenues when the tax rate is below 100%. But it is factually wrong to say that a government collects no revenues at a 100% taxation rate.

Even a glance at any of the memoirs and histories of that era falsifies your claim.

A) aftertax cash incomes did exist in all communist countries.

B) non-cash incomes in the form of privileges, barter, bribery and so on constituted the majority of income. Fiat cash revenues is not income.

 

[Truthmatters]

Could you people give a an example of the laffer curve working in real life?

 

[william the wie]

What is taxed and in what way determines maximum revenue and over what political cycle: the two year congressional cycle, the four year presidential cycle or the ten year reapportionment cycle?

Also how and where the money is expended makes at least a big of a difference in current and future revenues as taxation.

Since no real studies have been made about how any of the above works despite hundreds of years of tax and revenue data I don't this the question can be answered as asked.

 

[Toro]

If there is a 100% tax rate there will be no taxes to spend or contribute to the economy because people will not earn or pay taxes if they get nothing in return.

Again, that's not true. If it were true, then communist nations would have zero revenue. But clearly, that wasn't the case. I've known many people who worked behind the Iron Curtain who were highly educated and worked hard.

Now, of course, a free market system works much better, and the government does collect more tax revenues when the tax rate is below 100%. But it is factually wrong to say that a government collects no revenues at a 100% taxation rate.

Even a glance at any of the memoirs and histories of that era falsifies your claim.

A) aftertax cash incomes did exist in all communist countries.

B) non-cash incomes in the form of privileges, barter, bribery and so on constituted the majority of income. Fiat cash revenues is not income.

Excuse me, 98% tax rate.

I had several friends who lived and worked behind the Iron Curtain before it fell. I used to sell into the Soviet Union during Glasnost when I lived in London. Most people did not barter, and most people did not bribe. There were differentials in pay, but they were small. The government captured most of the economic value-added.

Of course, communism failed, as it eventually always will. But revenue wasn't even close to zero. GDP of the USSR was about $1.5 trillion, most of it generated by the government.

 

[KissMy]

Excuse me, 98% tax rate.

I had several friends who lived and worked behind the Iron Curtain before it fell. I used to sell into the Soviet Union during Glasnost when I lived in London. Most people did not barter, and most people did not bribe. There were differentials in pay, but they were small. The government captured most of the economic value-added.

Of course, communism failed, as it eventually always will. But revenue wasn't even close to zero. GDP of the USSR was about $1.5 trillion, most of it generated by the government.

Since the 98% taxed economy failed it was obviously to high & far above the optimum tax rate. As I posted previously, most people do not realize the percent of tax they are paying is already over 70%.

They rarely add up all the taxes they & their employer pay every year from their earnings. Medicare, SS, Federal, State, County, City, Healthcare, License, Sales Tax, Real-estate Tax, Personal Property Tax, Automobile Tax, Phone Taxes, Gas Tax, Utility Tax's, Permit Fees, Mandatory Unemployment Insurance, Mandatory Auto Insurance, Mandatory Healthcare Insurance, Sin Taxes.

So are we over taxed or under taxed as far as producing maximum government revenue? Japan can't seem to squeeze any more out of their population to prevent their coming debt collapse & their top earnings tax rate is 40% of taxable income exceeding 18 million yen plus 4,404,000 yen. They have Municipal Income Tax Rates of 6% & Prefectural Tax Rates of 4%.

The way I see it in the USA if the government does not cut spending or dramatically increase government products & services per dollar of tax they collect then there is no way to cover the gap with tax revenue. Government workers are paid twice the rate of the private sector yet they produce very little goods & service. Japan has been frantically trying to fix their gap & every time they raise taxes their economy slows. They are screwed & we will soon be in their same boat.

 

[editec]

laffer is a joke:

YouTube - Peter Schiff - (Former Ron Paul Economic Advisor) Versus Art Laffer (Former Ronald McReagan Economic Advisor) - August 28, 2006 - Peter Schiff [Pimp]

Bingo.

Who was right?

Not Laffer that's for damned sure.

He saw the investment bubbles as real wealth.

EVen as (real) productivity was going down, he was focusing on the price of investments (those ubbbles) and thought they were REAL wealth,

Again and again in my lifetime I've seen the same mistake made.

That exactly why we have had this diconnect between Main Street and Wall Street, folks.

We don't remember what WEALTH really is.

We keep confusing wealth for the prices on Wall STREET.

So if you think that way (ass our leaders did for the last thirty years) , Maine street can be closing down, but as long as the investor class is still in BUBBLE MODE, they keep thinking the USA is getting richer and to hell with the working class outcomes. (they should have studied invetment banking in school!)

And then, as we've seen, the working class collapses under thye pressure of taxation and diminishing purchasing power, they cannot keep up the consumer economy and everybody's surprised that their precious Bubble investments collapse.

Societies need balance. Economies need balance.

When the investment class has all the advantages in taxation and trade policies, and the working class is expected to pay the bills, sooner or later the economy collapses.


The working classes (the middle classes) have been crushed between the tax and borrow Republicans and the tax and spend Democats.

 

[antagon]

Excuse me, 98% tax rate.

I had several friends who lived and worked behind the Iron Curtain before it fell. I used to sell into the Soviet Union during Glasnost when I lived in London. Most people did not barter, and most people did not bribe. There were differentials in pay, but they were small. The government captured most of the economic value-added.

Of course, communism failed, as it eventually always will. But revenue wasn't even close to zero. GDP of the USSR was about $1.5 trillion, most of it generated by the government.

Since the 98% taxed economy failed it was obviously to high & far above the optimum tax rate. As I posted previously, most people do not realize the percent of tax they are paying is already over 70%.

there were externalities to the USSR's failure. not a prototype for a laffer conclusion.

The way I see it in the USA if the government does not cut spending or dramatically increase government products & services per dollar of tax they collect then there is no way to cover the gap with tax revenue. Government workers are paid twice the rate of the private sector yet they produce very little goods & service. Japan has been frantically trying to fix their gap & every time they raise taxes their economy slows. They are screwed & we will soon be in their same boat.

this just looks at our economy through the laffer presumption, too. like i said earlier, there is no curve worth tracking, because too many conditions like the static ones i had mention will impact its theoretical form. flexible factors like interest rates, the business cycle and the investment and commercial trends that they instigate can change week to week, making it even harder to track. the willingness to participate in a booming economy is far greater than it is now... essentially there are more curves to track than tax from the private side.

from the public side, i can see changes in the way that taxes are collected serving to address the gap differently than before. income taxation is receding and deduction-based value added taxation has already encroached on it significantly. tax-for-capture like the healthcare and financial service's legislations, target industries with large and fairly arbitrary fixed taxes. cap and tax bill is another industry direct tax which might not tie tax to income, but rather, participation in the economy.

one thing is certain: the source of public finance changes every hundred years. its about that time. as you've noted, the income tax solution is about as toast as 19th century tariffs were - it simply can't finance the economy's evolution. it is my opinion that you evolve finance to match, rather than attempt to impose direction to the economy's natural course: the american way.

 

[editec]

Antagon.

Interesting thought about how government's are financed and how that must change to accomodate a changing system.

Yes for nearly 150 years our government (which did little) was financed by tariffs and taxes on some (like alcohol) products.

Then we initiated income taxes and loe and behold, our government went from isolationist policies to internationalist policies in a way it never could have otherwise, because it never could have afforded to do so.

Well since we appear to be evolving into a one world economy now, it might very well be time to rethink how we fund government.

In fact if we're really going down that one world economy (and government, too) then it follows that the system of taxation we have now no longer makes sense.

Thanks for giving me something to ponder upon.

I still think we might consider tariffs during this transition phase, but naturally those forces which are seeking one world economy and government are going to violently oppose such a policy.

 

[KissMy]

from the public side, i can see changes in the way that taxes are collected serving to address the gap differently than before. income taxation is receding and deduction-based value added taxation has already encroached on it significantly. tax-for-capture like the healthcare and financial service's legislations, target industries with large and fairly arbitrary fixed taxes. cap and tax bill is another industry direct tax which might not tie tax to income, but rather, participation in the economy.

one thing is certain: the source of public finance changes every hundred years. its about that time. as you've noted, the income tax solution is about as toast as 19th century tariffs were - it simply can't finance the economy's evolution. it is my opinion that you evolve finance to match, rather than attempt to impose direction to the economy's natural course: the american way.

The new health-care 1099 tax system will kill small business. I am selling one of my businesses now before that law takes effect. The new tax law will cause me to have to file over a thousand additional 1099 forms every year & pay more taxes to boot. There is no way a small business can deal with that shit. I have just fired an employee to make the business lean & attractive. I have 2 interested parties & hope to sell it in 3 months. These stupid buyers have no clue of the crap load of tax mess the new health-care bill will unload on them. I would rather be unemployed than spend all day filling out tax forms for no pay. In 2012 these happy new owners will be crying their eyes out.

 

[antagon]

i'm in a similar boat. i will buckle and use a temp agency, or may start up a temp agency to run all of the tradesmen who are jobless and can't market themselves. funny how the big biz gap is blowing a draft through our public finances and the government has the bright idea to close the 1099 system. i blame the subordination of the SBA and the useless chamber of commerce lobbyists. small biz advocacy is a joke in the US, considering it is the basis of our economy. 1099s were always an exploit... i guess the gig is up.

 

[editec]

from the public side, i can see changes in the way that taxes are collected serving to address the gap differently than before. income taxation is receding and deduction-based value added taxation has already encroached on it significantly. tax-for-capture like the healthcare and financial service's legislations, target industries with large and fairly arbitrary fixed taxes. cap and tax bill is another industry direct tax which might not tie tax to income, but rather, participation in the economy.

one thing is certain: the source of public finance changes every hundred years. its about that time. as you've noted, the income tax solution is about as toast as 19th century tariffs were - it simply can't finance the economy's evolution. it is my opinion that you evolve finance to match, rather than attempt to impose direction to the economy's natural course: the american way.

The new health-care 1099 tax system will kill small business. I am selling one of my businesses now before that law takes effect. The new tax law will cause me to have to file . There is no way a small business can deal with that shit. I have just fired an employee to make the business lean & attractive. I have 2 interested parties & hope to sell it in 3 months. These stupid buyers have no clue of the crap load of tax mess the new health-care bill will unload on them. I would rather be unemployed than spend all day filling out tax forms for no pay. In 2012 these happy new owners will be crying their eyes out.

What kind of SMALL BUSINESS has to file

over a thousand additional 1099 forms every year & pay more taxes to boot

Seriously, I want to understand your point.

 

[KissMy]

from the public side, i can see changes in the way that taxes are collected serving to address the gap differently than before. income taxation is receding and deduction-based value added taxation has already encroached on it significantly. tax-for-capture like the healthcare and financial service's legislations, target industries with large and fairly arbitrary fixed taxes. cap and tax bill is another industry direct tax which might not tie tax to income, but rather, participation in the economy.

one thing is certain: the source of public finance changes every hundred years. its about that time. as you've noted, the income tax solution is about as toast as 19th century tariffs were - it simply can't finance the economy's evolution. it is my opinion that you evolve finance to match, rather than attempt to impose direction to the economy's natural course: the american way.

The new health-care 1099 tax system will kill small business. I am selling one of my businesses now before that law takes effect. The new tax law will cause me to have to file . There is no way a small business can deal with that shit. I have just fired an employee to make the business lean & attractive. I have 2 interested parties & hope to sell it in 3 months. These stupid buyers have no clue of the crap load of tax mess the new health-care bill will unload on them. I would rather be unemployed than spend all day filling out tax forms for no pay. In 2012 these happy new owners will be crying their eyes out.

What kind of SMALL BUSINESS has to file

over a thousand additional 1099 forms every year & pay more taxes to boot

Seriously, I want to understand your point.

I have about a thousand business customers who spend $600 a year at my business via small payments spread out over the year. I also spend over $600 a year with vender's & at various stores in small amounts throughout the year. My profit margin is only about 10%.

The way taxes are currently done I tally up receipts in expense categories & enter the total in the appropriate space on the tax form. For the customers I total up all sales & enter that number on the tax form.

The new law says that a thousand of my customers must send me & the feds a 1099 forms & I must 1099 a hundred of my vender's & sent a copy of each to the feds. Fines & penalties for mistakes are steep & I have already been hit big a couple of times for missing a date or a mistake on a form. The IRS is hiring 17,000 new IRS agents to find more mistakes & enforce more fines that can result in jail time. The fines alone will wipe out all profit & cripple most business. Fuck this shit, I quit! Government will put me out of business. I am getting out while the gettings is good. Big Nulti-National Corporations will run the world. Small business will be something you read about in the history books.

 

[antagon]

Antagon.

Interesting thought about how government's are financed and how that must change to accomodate a changing system.

Yes for nearly 150 years our government (which did little) was financed by tariffs and taxes on some (like alcohol) products.

Then we initiated income taxes and loe and behold, our government went from isolationist policies to internationalist policies in a way it never could have otherwise, because it never could have afforded to do so.

Well since we appear to be evolving into a one world economy now, it might very well be time to rethink how we fund government.

In fact if we're really going down that one world economy (and government, too) then it follows that the system of taxation we have now no longer makes sense.

Thanks for giving me something to ponder upon.

I still think we might consider tariffs during this transition phase, but naturally those forces which are seeking one world economy and government are going to violently oppose such a policy.

i don't think party politics even plays a role in these deep metamorphoses. there have been some pivotal changes to our monetary and public finance within the last 100+ years, but they have all come from a recognition that something was wrong with the way policies were effecting the economy... the more recent off the head was the nixon shock, reaganomics, workfare and now a series of bills which i think is fair to call 'structured regulatory capture'... i think this you scratch my back, i'll scratch yours method will work for the next 40-50 years, but its application to small business is limited, and bigger businesses are less and less necessary.

in the mid 21st, its not unreasonable to buy a car from a boutique with a unique design because of technologies role in the accessibility to the benefits of economies of scale. as we can see, many bigger businesses are struggling with the plurality of competition.

this brings me to your last point about tariffs. say globalization is inevitable, then the US advantage is subsidy (if we could get our finances right). subsidy and capture. many of the disadvantages that tariffs and competitive shelters have had on american heavy industry could and should be avoided or mitigated through development and labor subsidy. regulatory consumer entrapment like the healthcare bill is not so cool, but it has already run its course on socal toll roads (and the complication of our tax code). cost of labor subsidy could put people to work at reasonable wages while reducing project-specific or unit-specific labor costs. like the healthcare and fin svc regs, there would be a predictable lump-sum participation cost borne by the industry. this will set an advantage up for the US. we could leverage our importation capacity against the chinese, for example, who are inclined to protest this soft-protectionism with tariffs.

these are the seeds which i see being sewn, but it peers too far into the future from the crossroads we're at now. to tie it back to the OP, part of staving off the implications of the laffer curve is to keep the goalposts moving with respect to the way the the government takes our loot... out the ass one century, out the mouth the next.

the garbage and likely not constitutionally sound fair tax is being considered in DC. this is not the future, but it does indicate an abandon ship of the 16th's finance solution.