Laffer Curve

[pbrower2a]

Do people here believe the Laffer curve actually applies in real world whereby after you increase tax rates above a certain point you lose more revenue than gain.  And if so at what rate do you believe the peak is around.  I believe the peak is around 45%, but it depends a lot on elasticity of income, ability to move elsewhere so in some jurisdictions it is higher, others it is lower.

If it had validity it would have expression in econometric analysis that measures it and case studies to back it up. The economic profession seems not to take it seriously.

It is more an ideological assertion than a documented relationship between taxes and economic activity. Taxes would have to be at punitive levels along with a failure to return public benefits to those from whom the taxes are taken. One can argue that the super-rich have more to defend: "American interests abroad", meaning their corporate investments overseas from revolutionary regimes that would confiscate American investments in the name of socialism.

Government spending goes back into the economy as private revenues. If the government is spending revenue on education it is ideally making students more likely to become high-income earners. If it spends funds on highways then what construction companies get is income that buys building materials and pays construction workers.     

[pbrower2a]

Whether he wants to acknowledge it or not, Laffer originally had the peak at 50%, which not coincidentally was the top rate after the first Reagan tax cuts in 1981.

Funny how the ideal top rate just kept dropping to whatever top rate the Republicans were proposing at the time!

There probably is an ideal top marginal rate for generating revenue ... but it's also probably somewhere around 80+%, making the whole concept of the Laffer Curve meaningless. Laffer never made any attempt to prove otherwise, relying solely on the intuition that very high rates would discourage additional income seeking.

Could it be desirable that more people go into entrepreneurial efforts? Inheritor classes are rarely the ones to start new businesses unless those are near-hobbies or vanity projects. So you are flush with cash and start a winery, or you start a 'book publisher' that offers books praising your religious or political values. Big deal!

In view of the death of the department store, I miss the small-town clothing stores that include the JC Penney stores that got closed so that they would not 'cannibalize' the revenue of mall anchors. A small-town version could hire plenty of workers with low education and no obvious skills. In minority-majority areas such stores could better fit local needs. Clothing designed for Caucasians usually fits Asians (except southwest Asians) badly, and some styles that look good on white people are disasters on blacks. JC Penney used to be three miles away from me in a town of 10,000 people... and then forty miles away in a city of 40,000... and it is now seventy miles away in a city of population 250,000+.

3-D printing can be much more responsive to customer needs than is manufacturing for a mass market. Mass markets are likely to disappear with greater prosperity.  It has the benefit of not producing excess stuff that typically ends up being sold at a huge discount as seconds and overruns.

America has all the class privilege that it needs -- and really has an over-run. We need more capitalists and more capitalism, and not further bloat of corporate behemoths with bureaucratic narcissists paid well for treating others badly while kissing up to shareholders. The idea behind the Laffer Curve is that the key to prosperity is to ensure that those already get rich get even richer while closing off opportunities to others.