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  #1 (permalink)  
Old 11-25-2007, 11:33 AM
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The Laffer Curve, do decreased taxes increase tax revenue?

I saw another post about decreased tax rates would increase tax collection because decreased taxes spur buissiness more then the lost tax revenue from decreased taxes. The laffer curve explains that in a graph of tax revenue collected and tax rate the collected revenue will be zero with no taxes or a 100% tax rate and will have a high point in the middle.

If graph is true and the current tax rate in America is above the point when taxes revenue is at its maximum then that will mean tha a decrease in taxes will increase tax revenue.

When i looked at the first sources i could find on google about this they all said in fact that decreasing taxes does not increase tax revenue.

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Tax cuts increase tax collections
Laffer curve - Wikipedia, the free encyclopedia

Many conservative people agree that decreasing taxes increases total revenue collected so i would like to hear some feedback
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Old 11-25-2007, 12:07 PM
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It depends on where society is on the curve. The conservatives say we are above the optimal point of taxation, liberals would argue that it's a bit more complicated, and that the rich need to be taxed more and the lower classes less.
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  #3 (permalink)  
Old 11-25-2007, 01:48 PM
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The implicit assumption here is that the state has control of the economic structure to a sufficient extent to allow it to actually set and collect taxes. For domestic purposes such as the taxation of private citizens and trade done exclusively inside it's borders, this is usually true.

Unfortunately, this does not apply to multinational trades and may not even apply to domestic trade. Bill Gates is, indeed, one of the world's richest men--but his company was, I believe, at one time, registered in the Caribbean. This gave the company the advantages of a lower tax regime and considerably reduced the US tax take. This is an example of "tax avoidance" [Which is legal] as distinct from "tax evasion", which is not.

There are many such examples. This leads to one conclusion--that the tax base of a nation is often much smaller than the wages / earning base.

Until you can broaden the tax base, you will always face the problem that you can only tax the people that cannot prevent you from doing so, and that these are often the poorest.

I see no purely national solution

Melek
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Old 11-25-2007, 07:34 PM
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I read that some economists claim to have discovered that the "mid-point" of the Laffer curve is 80%, ie if the tax goes above 80% then revenue falls. I don't know what evidence they gave for this. Certainly, in the 60s, when Britain had 90%+ tax rates for the super-rich, it didn't work, as they just moved to other countries or didn't bother working to earn that much.
But then, most conservatives would argue that 80% is far too high. It seems reasonable to me, but I expect that it has a lot to do with the cost of living, expectations, work ethic, and other factors, and there is no hard and fast mid-value.
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Old 11-25-2007, 07:39 PM
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I read that some economists claim to have discovered that the "mid-point" of the Laffer curve is 80%, ie if the tax goes above 80% then revenue falls. I don't know what evidence they gave for this. Certainly, in the 60s, when Britain had 90%+ tax rates for the super-rich, it didn't work, as they just moved to other countries or didn't bother working to earn that much.
But then, most conservatives would argue that 80% is far too high. It seems reasonable to me, but I expect that it has a lot to do with the cost of living, expectations, work ethic, and other factors, and there is no hard and fast mid-value.
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