Thoughts, essays, and writings on Liberty. Written by the heirs of Patrick Henry.

February 25, 2008

Understanding The Laffer Curve

by Doug Mataconis

Here’s a great set of videos explaining the reasoning behind, and the evidence in favor of, The Laffer Curve.

Part One:

Part Two:

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  • http://anarchangel.blogspot.com Chris

    These videos need Ben Stein.

  • oilnwater

    the speaker does a good job of explaining diminishing returns on taxation. but i couldn’t help but hear the flat tax comment in Part1 and how a flat tax is ideal, and really cringe. so here goes a rant—

    our convoluted tax system is largely a product of our citizenry/corporations rejecting transmittal of information to the state unless it behooves that individual/corporation or he cannot otherwise get around transmitting any particular item of information. last time i checked, flat tax implementation comes in two main varieties:

    1)point-of-consumption: done by Value Added Tax(VAT) or Retail Sales Tax(RST). completely depersonalizes the taxation process. often is invoked with use of National ID card. possibly encoded with base biometric data (fingerprint only due to costs). regardless, a new mandated retail taxation infrastructure would be necessary that is personal information intensive and interacts with a central information bureau- basically consumers with their “govt purchasing cards” and businesses with their issued govt card readers. totally….f**king…. lame. oh, and not to mention that many economists profer that this taxation approach might lead to gross misproduction on the part of producers when deciding exactly what to make out of certain raw materials in order to maximize their VAT savings. this shit just reeks of a command economy model and it looks to me like the worst possible taxation idea for Americans ever envisioned.

    2)consumed income tax: taxing individual consumption. (Total annual income + annual borrowings), minus annual savings = taxable amount. this is even more insane for all reasons mentioned above (in fact this taxation method is even more information intensive regarding both individual savings and loans) AND it reeks even more of a command economy through taxation. “we want you to save, now!” not only does our American govt have no business in punishing our consumption, but this method makes no sense as it puts downward pressure on consumption for an advanced economy whose GDP is %70 fed by consumers.

    … at any rate, the CATO institute confounds me. friedman, its champion and obviously a dedicated economic genius, was very wrong in his assertion that central planning in regards to money is a good thing to do. i would actually look up to him had he advocated free banking, or at the very least stressed the need for an independent Fed. then the institute champions a domineering,pervasive new tax infrastructure (flat tax), at a time when we should be pushing to eliminate the federal income tax. and on top of that, this institute routinely injects racist misdirection invective when trying to discuss immigration. do you libertarians really take your marching orders from this organization?

  • Norm Nelson

    our convoluted tax system is largely a product of our citizenry/corporations rejecting transmittal of information to the state unless it behooves that individual/corporation or he cannot otherwise get around transmitting any particular item of information.

    oilnwater, did you cut and paste this from a IRS bulletin? I’ve read it several times ….. now my head hurts.

    How in the world does a sales tax require you to have a biometric ID card? Nobody at Sears asks for my ID when they collect sales tax. Perhaps you are a little behind on your research?

  • oilnwater

    oh, you wanna know?

    The new technology can be taken much farther, personalizing business-based tax
    systems. One example was proposed a decade ago as a way to introduce some
    progressivity into a retail sales tax system. The idea was to provide every family with an
    annual “smart card” that would have a sales tax credit based on family size. Each time the
    family made a purchase, the smart card would deduct that amount until the card’s credit
    was used up; after that, the family would begin to pay the sales tax.24 This kind of
    scheme is facilitated by the technology of biometric identifiers based on unique
    physiological or biological characteristics that can be stored electronically and retrieved
    for positive identification. For RST or VAT, the smart card can encode information
    about the purchaser – such as income or charitable inclinations – that can personalize the
    consumption tax rate in the same way that my grocery store offers me individual-specific
    discounts based on my purchasing history when I – as is in my interest – present my card.
    The Ulyssean argument for business-based taxes will be undermined by this technology,
    although how it will personalize the tax liability to the consumer rather than the purchaser
    will require a technology that has not yet been developed. The tax smart cards could
    contain information from brain fingerprinting or genetic information.

    http://www.law.ucla.edu/docs/slemrod-big_brother_talk_011006.pdf

    this PhD of course is not the first to speculate. in the UK, the NIR (Nat’l ID Regist.) program was partially touted to make England’s flat tax easier to implement.

  • oilnwater

    well, it looks like either way, our tax masters WILL be devising a way to get money out of you more efficiently:

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aJpRkYBhnffQ&refer=home

    this is only one of the latest warnings about municipal finances, and you can bet it’s much the same for some states. when the system goes down, that’s when measures will be taken sooner rather than later. i’d expect more flat tax garbage (or any variation to a point-of-sale infrastructure) to be pushed strenuously pretty soon.

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