This post is about the importance of the Laffer Curve.An ecomic concept named by the man who invented it.
This curve illustrated the two most important aspects of taxation.
1 : How much money the government can raise from taxes.
2 : At what level of taxation the government will start receiving less taxes.
The laffer curve is illustrated here as an example and can change forms.
For example.If tax rate is 0 and we pay 100% of it then the revenue is 100% x 0 = 0$ which is the first point of the graph.
As we increase the tax rate at least at the low levels more revenue will be received.When tax rates start growing to much we create the "hump" which means that more people start not paying and therefore the total revenue is decreased.
If the tax rate is 100% then no one would pay it therefore 0% x 100 = 0$
All the points between those to form the laffer curve.
THIS HAS HAPPENED BEFORE.
During the great depression the government passed the HAWLEY - SMOOT TARIFF BILL which raised taxes on all imported goods but the revenue went down.
During the 80's with REAGAN's TAX CUT ON THE RICH which cut taxation from 70% to 50% the income from the rich only increased.
Even the most LEFT economists agree on one thing.The Laffer curve has a "hump" which means that at some point the tax increased hurts the actual revenue.
What they disagree on is WHERE exactly this hump is.Meaning which is the golden point where most revenue can be raised.
Up until a few years back even the econimist's textbooks reported that this hump occures arounf the 70% taxation,but apparently this was wrong.
According to most recent publications by Christina Romer who was the chairman of pres.Obama's council of economics suggest that the curve occurs around 33% .
This publication focused on how national income responds to tax rates.
Doing the math,proves that 33% is the golden point.
The meaning of this post is that no matter what you vote left or right,the Laffer Curve works and should be taken into account.
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