Where does the Laffer Curve Bend?

[antagon]

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 fines alone will wipe out all proffit & cripple most business.

this is what i mean by 'regulatory consumer entrapment' via the tax code. this type of bullshit begs every business to hire a financial service provider in order to operate. those providers have a federal hand up their ass skimming the profit. this is a new twist, and i don't have it nearly as bad, but it is clear business plans will need to change to accommodate it.

add another complexity factor to the laffer curve: red tape coverage: how much does it cost just to pay taxes? how much can the gov't get away with when owners don't/can't file their own taxes?

 

[editec]

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.

And you have to file a 1099 each for THEM? I don't get that.

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.

This makes sense to me.

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.

Jesus! What a nightmare!

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.

My extreme sympathies.

I don't fully understand the rational for you've having to fill 1099's for SALES, but if you say you have to, who am I to doubt it?

Thanks for keeping me informed.
\

 

[midcan5]

Historically the laffer curve is a joke. There is no set figure on this nonsense, look at countries in Europe as examples. Denmark, for instance. Economics is not a science as the recent (almost) meltdown proved. In order for economics to make sense, we'd need to eliminate people who are motivated by all sorts of things.


"Conservatives say if you don't give the rich more money, they will lose their incentive to invest. As for the poor, they tell us they've lost all incentive because we've given them too much money." George Carlin


"Impossibility statements are the very foundation of science. It is impossible to: travel faster than the speed of light; create or destroy matter-energy; build a perpetual motion machine, etc. By respecting impossibility theorems we avoid wasting resources on projects that are bound to fail. Therefore economists should be very interested in impossibility theorems, especially the one to be demonstrated here, namely that it is impossible for the world economy to grow its way out of poverty and environmental degradation. In other words, sustainable growth is impossible." Herman E. Daly / Kenneth N. Townsend


"There is no historical evidence that tax cuts spur economic growth. The highest period of growth in U.S. history (1933-1973) also saw its highest tax rates on the rich: 70 to 91 percent. During this period, the general tax rate climbed as well, but it reached a plateau in 1969, and growth slowed down five years later. Almost all rich nations have higher general taxes than the U.S., and they are growing faster as well." Tax cuts spur economic growth

 

[KissMy]

Almost all rich nations have higher general taxes than the U.S., and they are growing faster as well."
Tax cuts spur economic growth

All those so called growing faster rich nations in your article are heavily in debt, slowing, broke or defaulting on debt. What a fucking fairy tale.

FDR had 50% inflation. DUH! No wonder tax revenue grew.

 

[antagon]

what rich nations are growing faster than the US?

 

[loosecannon]

You have no concept of economy.

Wrong, I have a nearly perfect record predicting the many stages of the current recession years in advance, the credit crisis, housing bubble the causes etc.

I nailed it.

I feel quite sure you were among the "shocked".

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. They will forage for wild berries or steal to live but government will never collect a dime from them. The only way to get people to work will be to beat them like a slave if they don't. All reward is lost & only punishment remains. Government will not have revenue to hire soldiers to beat the slaves & soldiers who have to pay 100% tax will not beat slaves. There will be no economic activity.

As the subprime lending standards have proven, people with no concept of interest rates, economy, risk or personal accountability will barrow money if you let them & there are no consequences for failing to repay the loan. If there are no lending standards the fed just hands out money for signing loan documents. Interest rates are in no way as powerful as credit standards. If they were the zero percent interest over the past 2 years would have skyrocked the economy & inflation. The fact is that credit lending standards are so tight that loans are not being made.

Like I said before who gives a shit about the many nuance facets of economy if the main ones are out of whack.

great, then quit worrying about the laffer curve and start worrying about one of the factors that actually matter.

Like the money supply, deflation, the entitlements crisis, the deficit, the two parties, the monetarist idiots advising our leadership, globalization etc..

We have massive economic problems brewing and nearly nothing in the way of solutions on the table.

The Federal Reserve, the only federal agency actually tasked with managing growth, has saved the banks and a few large industries and of course preserved the ability of the feds to maintain deficit spending, but done absolutely jack shit for the economy itself.

The optimum level of taxation is almost purely a function of the level of services provided by the government. With our socialist system we aren't paying nearly enough taxes.

The laffer curve is just a silly idea.

 

[KissMy]

You have no concept of economy.

Wrong, I have a nearly perfect record predicting the many stages of the current recession years in advance, the credit crisis, housing bubble the causes etc.

I nailed it.

I feel quite sure you were among the "shocked".

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. They will forage for wild berries or steal to live but government will never collect a dime from them. The only way to get people to work will be to beat them like a slave if they don't. All reward is lost & only punishment remains. Government will not have revenue to hire soldiers to beat the slaves & soldiers who have to pay 100% tax will not beat slaves. There will be no economic activity.

As the subprime lending standards have proven, people with no concept of interest rates, economy, risk or personal accountability will barrow money if you let them & there are no consequences for failing to repay the loan. If there are no lending standards the fed just hands out money for signing loan documents. Interest rates are in no way as powerful as credit standards. If they were the zero percent interest over the past 2 years would have skyrocked the economy & inflation. The fact is that credit lending standards are so tight that loans are not being made.

Like I said before who gives a shit about the many nuance facets of economy if the main ones are out of whack.

great, then quit worrying about the laffer curve and start worrying about one of the factors that actually matter.

Like the money supply, deflation, the entitlements crisis, the deficit, the two parties, the monetarist idiots advising our leadership, globalization etc..

We have massive economic problems brewing and nearly nothing in the way of solutions on the table.

The Federal Reserve, the only federal agency actually tasked with managing growth, has saved the banks and a few large industries and of course preserved the ability of the feds to maintain deficit spending, but done absolutely jack shit for the economy itself.

The optimum level of taxation is almost purely a function of the level of services provided by the government. With our socialist system we aren't paying nearly enough taxes.

The laffer curve is just a silly idea.

You cant predict the subprime bubble if you think as you do that interest rates have more economic impact than issuing credit to people just because they have a pulse vs using credit worthy FICO standards. Pardon me if I don't believe you on your prediction.

I know how to predict these things & have done very well. I also predicted the housing bubble & sold all 4 of my houses in 2006-2007 except for the one I live in. I sold nearly all stock in 2007 except Potash & bought Oil & Gold. All my family thought I had lost my mind & told me I should seek professional help. Now they are in the poor house & I have bought 4 more homes for the price I sold 1 house for in 2007. I now have to hound 2 of them to pay me rent since they begged me to let them stay in one of my houses after they lost theirs. I lost some on Potash before selling out but made it up on oil before I sold out. I bought huge amounts of gold on election day Nov 2008.

-If loosecannon thinks he is all that then what significant financial event will happen in the economy in November 2012 besides the election?
-Also what event happened on the day Crude Oil prices peaked out at the all-time high of $145.29 & caused it to drop $112 down to $33.87?
-Then what event caused Crude Oil prices to start climbing again?

As for the other factors I am focused on them & that is why I am a TEA Partier. I don't worry about it I just try to position myself to benefit from the ignorance that our leaders impose upon us. The biggest current event is their reformation of Fannie & Freddie. It may drop credit standards & the dollars value while it raise the national debt, lending & inflation.

As for all the ignorant Democrats who want to raise taxes just consider the fact that you are already heavily taxed by the declining dollar. You have paid an 85% hidden tax in the last 40 years. The doctored up CPI is not relevant.

 

[antagon]

saying that, do you mean to say we'd be better off with a deflationary economy?

 

[KissMy]

saying that, do you mean to say we'd be better off with a deflationary economy?

No, but growth of debt & the money supply should not out pace population & innovation growth. Prices should remain stable. We should not have home & oil prices rising 400% in 6 years. The CPI is so rigged by Clinton's substitution rule that it does not show inflation when true inflation was running at 8% at a time when the true economy was declining.

 

[william the wie]

saying that, do you mean to say we'd be better off with a deflationary economy?

Real per capita economic growth in the form of radios, refrigerators and cars per household actually increased in the 1930s. The long depression of 1873-98 was also a time of real per capita economic growth with the spread of bicycles and telephones. Keynes and the Cambridge school were opposed to deflation because they were part of the British establishment and the combination of leverage and inflation made them rich.

 

[antagon]

saying that, do you mean to say we'd be better off with a deflationary economy?

No, but growth of debt & the money supply should not out pace population & innovation growth. Prices should remain stable. We should not have home & oil prices rising 400% in 6 years. The CPI is so rigged by Clinton's substitution rule that it does not show inflation when true inflation was running at 8% at a time when the true economy was declining.

i think the goal of mild inflation is preferred to price stability in an economy as our own. the money supply fluxes to achieve that, i guess, and to facilitate commerce.

there's something non-scientific about capturing exceptional appreciation in the home market as a testament to inflation, then leaving out the fact we're all well acquainted to: that the value of those same homes has bust sufficient to show a 8 year deflationary trend.

 

[antagon]

saying that, do you mean to say we'd be better off with a deflationary economy?

Real per capita economic growth in the form of radios, refrigerators and cars per household actually increased in the 1930s. The long depression of 1873-98 was also a time of real per capita economic growth with the spread of bicycles and telephones. Keynes and the Cambridge school were opposed to deflation because they were part of the British establishment and the combination of leverage and inflation made them rich.

is the real per cap econ growth exclusive to deflationary periods? do the externalized investment values of english tories translate well to our industrial and growth priorities?

 

[KissMy]

California has the highest aggregate state tax rate in the nation combining income, property, gasoline & sales taxes. Yet California has the nations largest debt/deficit problem by a magnitude multiple times that of the next worst state.

In sharp contrast Texas has one of the lowest aggregate state tax rate in the nation combining income, property, gasoline & sales taxes. Yet Texas has the nations lowest debt/deficit problem by a mile compared to the next worst state.

This proves that raising taxes does not decrease debts/deficits & that the Laffer curve has merit.

 

[Toro]

It bends at 80%

High earners are internationally mobile, and so will emigrate if taxes are too high. Because of this, tax increases actually reduce revenue. So goes the standard rightist claim. However, a new paper (pdf) suggests it is plain wrong. Henrik Kleven, Emmanuel Saez and Camille Landais have studied the response of professional footballers in Europe to tax rates. And they’ve concluded that the revenue-maximizing tax rate upon them in England is over 80%.

Yes, there is a Laffer curve - it’s just that we are on the left of it.

This is not because top footballers don’t leg it when faced with higher taxes. They do. The authors estimate that a rise in the top tax rate of 10 percentage points reduces the probability of a foreign player joining that country’s league by four percentage points. ...

This mobility, though, is not sufficient to justify low taxes. The reason for this is simple. If a high-ability player leaves, he’ll be replaced by lower-ability one; when Cristiano Ronaldo flounced off to Spain, [Manchester United] did not field just 10 players. This displacement effect means the loss of tax revenue is far smaller than the loss of the top player would suggest. The upshot is that revenue-maximizing tax rates are high. ...

A footballer’s career is short. So he does not have the option, which other workers do, of postponing retirement in order to make up for a loss of post-tax income. For footballers, then, substitution effects dominate income effects in a way that is not true of other workers.

Secondly, footballers - especially from smaller countries - are accustomed to having to move country. So they are more mobile than other workers.

On the other hand, though, there’s a big difference arguing the other way. Football must be located in England. Fans expect Arsenal to be based in London, not in Basle. But the same is not true for the hedge fund industry. It could move overseas in its entirety. This argues for lower taxes.

However, as demand for £1 million houses has risen sharply in the last year, and prices of prime London property are rising, it’s not obvious that the new 50p tax rate is, so far, reducing the rich’s inclination to live in England.

What’s more - of course - revenue maximization is not the only criteria here. The authors find that higher taxes do reduce the quality of a country’s football league by driving out some of its top players. And there are, of course, also arguments that huge taxes reduce freedom.

Nevertheless, the fact is that complaints that higher taxes will backfire and produce less revenue are highly dubious.

Stumbling and Mumbling: Laffer curves for footballers

 

[william the wie]

Toro, I think the question is or should be what tax rate and other policies cause the right level of upward and downward mobility for maximum sustainable growth and wealth accumulation in the bottom quintile.

 

[Toro]

Toro, I think the question is or should be what tax rate and other policies cause the right level of upward and downward mobility for maximum sustainable growth and wealth accumulation in the bottom quintile.

Sure, that's a different question. I certainly wouldn't advocate an 80% tax. That would decimate the economy. Lower taxes (and spending) are generally better than higher taxes IMHO.

But the point at which cutting the income tax rate generates enough growth to offset the lost tax revenues from the lower rate of income tax is very high.

 

[KissMy]

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. It is obvious from my previous post here that California is on the downward slope of the Laffer curve & Texas is on the upward slope of the Laffer curve. Soon most of western world will be on the downward side of the Laffer curve.

 

[loosecannon]

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. It is obvious from my previous post here that California is on the downward slope of the Laffer curve & Texas is on the upward slope of the Laffer curve. Soon most of western world will be on the downward side of the Laffer curve.

I am clearly not paying 70% of my income into taxes. Maybe if you counted utilities, insurance and a few other categories of expenses as "earnings out to someone who spends it for them" it might be 70%.

But I have never seen data that our comprehensive tax burden is above 55%. And SS is an insurance not a tax. Same with Medicare unemployment insurance and copays for health insurance.

 

[KissMy]

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. It is obvious from my previous post here that California is on the downward slope of the Laffer curve & Texas is on the upward slope of the Laffer curve. Soon most of western world will be on the downward side of the Laffer curve.

I am clearly not paying 70% of my income into taxes. Maybe if you counted utilities, insurance and a few other categories of expenses as "earnings out to someone who spends it for them" it might be 70%.

But I have never seen data that our comprehensive tax burden is above 55%. And SS is an insurance not a tax. Same with Medicare unemployment insurance and copays for health insurance.

If it is mandatory, It is a tax that will drive underground trade & tax avoidance business strategies. The larger these mandatory taxes grow, the more it will drive people to get around these mandatory taxes any way they can. At some point paying enough IRS cops to police everyones trade will cost more than the returns generate. Just like those bankrupt European countries that forced a Euro bailout. Their debt & unfunded-mandates are so large that it will be impossible to tax their way out of the problem. They must cut government expenses & take printed money to stay afloat.

 

[boedicca]

saying that, do you mean to say we'd be better off with a deflationary economy?

No, but growth of debt & the money supply should not out pace population & innovation growth. Prices should remain stable. We should not have home & oil prices rising 400% in 6 years. The CPI is so rigged by Clinton's substitution rule that it does not show inflation when true inflation was running at 8% at a time when the true economy was declining.

There is one other reason why CPI is rigged to increase - to continuously lower the real income level subject to high taxation.

It's why the AMT which applied to 200 super rich families in 1969 will now affect over 25M people next year, with incomes as low as $60,000 in today's dollars.

Inflation is the way to put a big tax yoke on all the little people.