Do tax loopholes and incentives invalidate the Laffer Curve? Would it be valid with a flat tax?

[Seymour Flops]

I'm no expert, but I understand the basics of Laffer's curve theory. If the government taxes income at 1%, it would generate much less revenue than the current rates. But if goes to 90%+ people lose their incentive to earn income and revenue drops, likey to much lower rates than if we kept our current rates. Therefore, if the idea is to generate as much revenue as possible, then governments should look for that sweet spot percentage that would do that.

I can see that working with a flat tax. Start with 20%, then lower or raise by 5% the next year and see what happens to revenue. But I don't think we would ever know given our incredibly complicates system of providing breaks to this group or that.

It isn't just the rich who get the breaks. The fact that lower income people pay a smaller percentage is a break for them, especially if they don't go over the income threshold to pay income taxes. But yes, the wealthy are the ones who can afford lobbyists to push for tax breaks, and tax attorneys to make sure they use all the breaks available.

If congress decided to raise the tax rates by 2% across the board, it would be impossible to determine the effect of that on revenue. Why? Because that bill/law would not be one sentence like "All existing tax rates will be increased by 1%, beginning January 1, 2024." No, it would be thousands of pages listing all the new breaks for some and penalties for others.

The ability to use the Laffer Curve effectively is one of many arguments in favor of a flat tax. I honestly don't understand why any well-meaning person would oppose it.

 

[jackflash]

Greed + propaganda + power/control + narcissism = the god complex. Those in the before mentioned convince the 'less gifted' that a flat tax will punish them unfairly. Keep the pikers dumbed down by convincing them to dumb themselves down!

 

[Donald H]

I'm no expert, but I understand the basics of Laffer's curve theory. If the government taxes income at 1%, it would generate much less revenue than the current rates. But if goes to 90%+ people lose their incentive to earn income and revenue drops, likey to much lower rates than if we kept our current rates. Therefore, if the idea is to generate as much revenue as possible, then governments should look for that sweet spot percentage that would do that.

I can see that working with a flat tax. Start with 20%, then lower or raise by 5% the next year and see what happens to revenue. But I don't think we would ever know given our incredibly complicates system of providing breaks to this group or that.

It isn't just the rich who get the breaks. The fact that lower income people pay a smaller percentage is a break for them, especially if they don't go over the income threshold to pay income taxes. But yes, the wealthy are the ones who can afford lobbyists to push for tax breaks, and tax attorneys to make sure they use all the breaks available.

If congress decided to raise the tax rates by 2% across the board, it would be impossible to determine the effect of that on revenue. Why? Because that bill/law would not be one sentence like "All existing tax rates will be increased by 1%, beginning January 1, 2024." No, it would be thousands of pages listing all the new breaks for some and penalties for others.

The ability to use the Laffer Curve effectively is one of many arguments in favor of a flat tax. I honestly don't understand why any well-meaning person would oppose it.

Sorry but you don't understand when you use 90% as 'point A' on the Laffer curve.
Get Jude Wanniski's book, TWTWW, and come back when you understand.

 

[Donald H]

Greed + propaganda + power/control + narcissism = the god complex. Those in the before mentioned convince the 'less gifted' that a flat tax will punish them unfairly. Keep the pikers dumbed down by convincing them to dumb themselves down!

Would you like to learn why the flat tax is a scam invented by the very wealthy, and the reason why it's not taken seriously enough to even fight about?

 

[Seymour Flops]

Sorry but you don't understand when you use 90% as 'point A' on the Laffer curve.
Get Jude Wanniski's book, TWTWW, and come back when you understand.

I didn't say anything about 'point A,' and I don't need reading assingment from a functional illiterate.

 

[Rigby5]

The goal of government should NOT be to maximize tax income.
Government should do as little as possible and tax as little as possible.
But the problem is taxes should be proportional to ability to pay, and currently they are not.
Too many loopholes that only the wealthy can afford to take advantage of.

 

[Rigby5]

Would you like to learn why the flat tax is a scam invented by the very wealthy, and the reason why it's not taken seriously enough to even fight about?

Actually a flat tax makes a great deal of sense, as long as it also includes a large flat deduction for household and dependents.

When you have a very large flat deduction for your household and dependents, then the poor will have very little or no income left to tax. So even if the flat rate is high, like 30%, they pay little or no tax.
So a flat tax rate is extremely progressive, if included with a large flat deduction system.
Just consider housing, food, etc., to be the cost of doing business, which should be deducted before establishing profit to be taxed.

 

[Seymour Flops]

Actually a flat tax makes a great deal of sense, as long as it also includes a large flat deduction for household and dependents.

When you have a very large flat deduction for your household and dependents, then the poor will have very little or no income left to tax. So even if the flat rate is high, like 30%, they pay little or no tax.
So a flat tax rate is extremely progressive, if included with a large flat deduction system.
Just consider housing, food, etc., to be the cost of doing business, which should be deducted before establishing profit to be taxed.

I think a better way is to start the flat tax on incomes over a certain amount, say 24K. Making them "deductions," only needlessly complicates the system, losing a key benefit of the flat tax.

 

[sparky]

IIRC, said 'laffer curve' originated in a bar on a napkin.......~S~

 

[Winston]

I'm no expert, but I understand the basics of Laffer's curve theory. If the government taxes income at 1%, it would generate much less revenue than the current rates. But if goes to 90%+ people lose their incentive to earn income and revenue drops, likey to much lower rates than if we kept our current rates. Therefore, if the idea is to generate as much revenue as possible, then governments should look for that sweet spot percentage that would do that.

I can see that working with a flat tax. Start with 20%, then lower or raise by 5% the next year and see what happens to revenue. But I don't think we would ever know given our incredibly complicates system of providing breaks to this group or that.

It isn't just the rich who get the breaks. The fact that lower income people pay a smaller percentage is a break for them, especially if they don't go over the income threshold to pay income taxes. But yes, the wealthy are the ones who can afford lobbyists to push for tax breaks, and tax attorneys to make sure they use all the breaks available.

If congress decided to raise the tax rates by 2% across the board, it would be impossible to determine the effect of that on revenue. Why? Because that bill/law would not be one sentence like "All existing tax rates will be increased by 1%, beginning January 1, 2024." No, it would be thousands of pages listing all the new breaks for some and penalties for others.

The ability to use the Laffer Curve effectively is one of many arguments in favor of a flat tax. I honestly don't understand why any well-meaning person would oppose it.

Yes, you understand the basics. It is a curve, which means at low rates increasing the tax rate results in increased revenue. At higher rates, decreasing the tax rates result in higher revenues. The real question is, where is the inflection point. Most economist will tell you it is around the 60% mark, and history bears that out. When Kennedy cut the tax rate revenue increased. When Reagan did, despite what the right wing shrills will tell you, revenue decreased. In fact, it decreased so significantly that a couple years later Reagan initiated the biggest tax increase in history for the time, and to this day, proportionally, still the biggest tax increase in history.

The right wing has been claiming that the Laffer curve is not a curve at all. That at almost any tax rate, decreasing that rate results in more revenue. Even Laffer himself, now bought and sold by corporations and the wealthy, still attempts to peddle that horseshit. Ironically, he has not been a "professor" for more than 40 years. Quoting a real economist, Greg Mankiw of Harvard,

""rah-rah partisans" who "do not build their analysis on the foundation of professional consensus or serious studies from peer-reviewed journals...The Laffer curve is undeniable as a matter of economic theory. There is certainly some level of taxation at which cutting tax rates would be win-win. But few economists believe that tax rates in the United States have reached such heights in recent years; to the contrary, they are likely below the revenue-maximizing level."

Snake-Oil Economics

Stephen Moore and Arthur Laffer's over-the-top enthusiasm for U.S. President Donald Trump's sketchy economic agenda in their new book Trumponomics is not likely to convince anyone not already sporting a "Make America Great Again" hat.

www.foreignaffairs.com

The reality is, I had a front row seat during the Reagan administration. Andrew Benavie was the head of the OMB. Working with the Wharton School econometric model he argued that Reagan's tax cut would generate additional revenue. As Benavie's TA, and with a background in econometrics, I was tasked with generating the numbers, they didn't add up. Our arguments, at He's Not Here on Thursday's economic department meetings, are legendary. Benavie left the Economics department and played cello for the New York Philharmonic, and as I already pointed out, Laffer also was ran out of academia.

 

[Donald H]

Actually a flat tax makes a great deal of sense, as long as it also includes a large flat deduction for household and dependents.

When you have a very large flat deduction for your household and dependents, then the poor will have very little or no income left to tax. So even if the flat rate is high, like 30%, they pay little or no tax.
So a flat tax rate is extremely progressive, if included with a large flat deduction system.
Just consider housing, food, etc., to be the cost of doing business, which should be deducted before establishing profit to be taxed.

The details are too complicated to be answered by your kneejerk comments. And I haven't received any indication that you or anyone else want a civil and rational discussion.

It never gets any deeper than everyone wanting to pay less tax, with no consideration on how the bills get paid.

 

[Donald H]

I didn't say anything about 'point A,' and I don't need reading assingment from a functional illiterate.

In fact you did and that's the reason why I knew you had no idea.

 

[Seymour Flops]

In fact you did and that's the reason why I knew you had no idea.

Show me any post of mine with the words "Point A." Before I said that I had not said "Point A."

 

[Donald H]

Show me any post of mine with the words "Point A." Before I said that I had not said "Point A."

Oh just shuddup. 90% refers to it.

 

[Seymour Flops]

Oh just shuddup. 90% refers to it.

It was an example. I did not mean that 90% was absolutely point A.

I was asking a question, not stating a truth. Contribute something to the thread besides childishness, please.