Reply #100: You have read the specs on the Laffer Curve, right? [View All]

[jmowreader]

According to Laffer, there are always two tax rates which will generate exactly the same tax revenue--one low, one high. There is also a sweet spot, a rate which generates the maximum tax revenue.

Also according to Laffer, the people will work like little beavers when the rates are low, but just slack off and do nothing when they're high.

That MIGHT work as an academic exercise. In the real world, the shit don't work because...

1) when high income tax rates are lowered, the investing class has more money to put into tax shelters.

2) when low income tax rates are raised, the investing class readjusts its investment profiles to favor tax shelters--hence screwing the people who issue the kind of investment vehicle that can't serve as a shelter.

3) the non-investing class gets screwed either way.

The only way to really test the Laffer Curve is to eliminate all tax shelters, and can you just hear the screams if you tried it?