Laffer wrote that piece for the purpose of showing that, under very specific conditions, a a tax cut may cover the costs of the tax cut.

The rightwing got a hold of that very narrow application and suddenly, "All tax cuts double tax revenue" or the like.

That's preposterous and no economist would make such an irresponsible claim.

Thanks, for the video link, but I can't watch them at work.

Here's a good summary I found:

There's an idea in economics about taxes called the Laffer curve, which is based on the extreme value theorem. What the Laffer curve describes is the relationship between tax revenues taken in by the government and take rates. Naively, you might assume a linear relationship between taxes and revenues: raise the tax rate, and the amount of money that the government brings in increases.

But reality isn't so simple. When you increase tax rates, you reduce the amount of money available to people and businesses for investment. So it's not a simple linear thing; the size of the pool of taxable profits can be altered by changing the tax rate, because a higher tax rate reduces the amount of money that can be invested in growing a business, which can slow the growth of the business, which reduces its taxable profits. The Laffer curve is a model for the relationship between tax rates and tax revenues. It starts off roughly linear, and then the revenue growth rate starts to slow, until it reaches an inflection point, and revenues start to decrease as tax rates increase. ...

What people like the WSJ editorial page like about the Laffer curve is that one of the implications of it is that if your tax rate is past the inflection point, then you can increase tax revenue by decreasing the tax rate. So they constantly argue that our tax rates area on the downward-trending side of the curve - and that therefore, lowering takes isn't just good because it means that people get to keep more of their money, but it's in some sense free, or even better than free, because it will have either no impact or a positive impact on government revenue.

The catch, of course, is that for that to be true, you need to be on the far side of the curve, where revenues are dropping because the rate is so high that it's stifling investment. The WSJ editorial board constantly argues that we're on that side. And they argue it in stupid, sloppy ways.
http://scienceblogs.com/goodmath/200...curve_from.php

Oh, I see. This is just an us against them type of deal? You don't like it because you want to be right.

The Bush tax cuts on the wealthy have done very little to spur economic growth and everything to turn a budget surplus into a sizable deficit. By the end of 2008, we will have seen the slowest economic growth of any 8-year period in over 50 years. McCain used to be smarter.

http://www.factcheck.org/taxes/supply-side_spin.html

Now McCain plans to extend the Bush tax cuts and additionally cut corporate taxes (stupid idea), which Obama aptly described as "doubling down".

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See, free nations are peaceful nations. Free nations don't attack each other. Free nations don't develop weapons of mass destruction.

- G.W. Bush, 10/3/2003

Very true, except for your "right-wing" generalization. Bush and McCain are part of it, but not every conservative economist.

I propose that we actually hold the tax rates steady for awhile, gather long term statistics on the rate of government revenue, and then shift the tax rates up or down a relatively small degree. Then that rate should be held for a long period of time and statistics gathered on that rate of government revenue. This way, we could ascertain where the extreme value of the Laffer curve lies, and could adjust tax rates accordingly. With $9 trillion in government debt, we should probably try to hit the peak value for government revenue. Once the debt is paid off, taxes should be reduced to the level necessary to keep the government functioning and no more.

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"It is extremely difficult for our contemporaries to conceive of the conditions of free banking because they take government interference with banking for granted and as necessary"

-- Ludwig von Mises

The deficit has increased because spending has increased. Tax revenues have also increased, so to blame the deficit on the tax cuts is wrong.

First off, that's wrong. From 1965 to 1980 stagflation caused no economic growth.
Do you even know what doubling down is? Does Obama for that matter? It's a good thing.

Thank you for completely ignoring my post and discussing something irrelevant.

That's a well-reasoned statement. I don't think I would use the Laffer Curve in any meaningful way though b/c I've seen some criticisms of it that left me with a lot of questions.

The budget is so complex that I would like to see proposals from accountants, econometricians, actuaries, economists and tax specialists. And that is just scratching the surface b/c when it comes to gov. expenditures, Defense, Soc Sec and medicare are real lightning rods b/c that's where most of our tax dollars go. I'm not sure anyone is rushing to cut those programs.

Thanks for continuing the trend.

The logic behind the existence of the Laffer curve is sound though; there is no way that it cannot exist. Mind sharing some of these criticisms?

All three of those programs need to have their budgets cut.

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"It is extremely difficult for our contemporaries to conceive of the conditions of free banking because they take government interference with banking for granted and as necessary"

-- Ludwig von Mises

Fine.

I just don't see your responses to the points I raised.