Quote:
Originally Posted by jyl
If you still believe Laffler curve "theory", given nearly 100 years of actual data that don't support it, consider this. Laffler did not say that lower tax rates always cause higher tax receipts. He theorized that there is a point above which tax rates become "prohibitive". His theory was that when rates are at or above that prohibitive point, increases in rates cause declines in receipts while decreases in rates cause increases in receipts. When rates are below the prohibitive point, his theory was that the reverse happens: increases in rates cause increases in receipts while decreases in rates cause decreases in receipts. That's implicit in the shape of the curve, shown below.
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He also notes that what makes taxes "prohibitive" is psychological. Regardless of the tax rate, if people sense that taxes are too high, they will start taking actions to avoid them. His theory is psychological guesswork, not the mathematical certainty it has been held out to be.