Kansas - The Great Experiment Ends

[bilby]

No, it's not.

So if the government taxed at 100% tax rate people would turn over 100% of their income and all money would go to the government and none to the people?

I agree with Loren. It's silly at the state level to believe that a 1 or 2% drop in tax rates would be switching the curve. But that doesn't mean that all taxes are that case.

You need to click the link; or google 'neo-laffer curve'.

 

[coloradoatheist]

So if the government taxed at 100% tax rate people would turn over 100% of their income and all money would go to the government and none to the people?

I agree with Loren. It's silly at the state level to believe that a 1 or 2% drop in tax rates would be switching the curve. But that doesn't mean that all taxes are that case.

You need to click the link; or google 'neo-laffer curve'.

The link says that we can't prove at any point where exactly it starts to curve downward. So my point is still, at 100% would 100% go to the government?

 

[Nice Squirrel]

You need to click the link; or google 'neo-laffer curve'.

The link says that we can't prove at any point where exactly it starts to curve downward. So my point is still, at 100% would 100% go to the government?

Depends on what kind of tax it is.

Let's say 100% tax on Vegemite sandwiches sales. You can still buy a Vegemite sandwich but it will cost you twice as much.

 

[bilby]

You need to click the link; or google 'neo-laffer curve'.

The link says that we can't prove at any point where exactly it starts to curve downward. So my point is still, at 100% would 100% go to the government?

As your Google-fu has clearly failed you, here is the neo-laffer curve:



If you can indicate THE point where it starts to curve downward, then please feel free to do so.

 

[Jimmy Higgins]

No, it's not.

So if the government taxed at 100% tax rate people would turn over 100% of their income and all money would go to the government and none to the people?

You seem to be on the verge of understanding the bullshit that is the Laffer Curve.

I agree with Loren. It's silly at the state level to believe that a 1 or 2% drop in tax rates would be switching the curve. But that doesn't mean that all taxes are that case.

It is stupid to think that drop current tax rates will increase tax revenue.

 

[jonatha]

No, it's not.

So if the government taxed at 100% tax rate people would turn over 100% of their income and all money would go to the government and none to the people?

I agree with Loren. It's silly at the state level to believe that a 1 or 2% drop in tax rates would be switching the curve. But that doesn't mean that all taxes are that case.

To expand a bit, the Laffer curve is obviously true, or nearly so, at its endpoints (0% and 100%).

In between the empirical evidence shows it bears little resemblance to reality, and there is no a priori reason to think such a curve, if it existed, would be a parabola.

 

[coloradoatheist]

The link says that we can't prove at any point where exactly it starts to curve downward. So my point is still, at 100% would 100% go to the government?

Depends on what kind of tax it is.

Let's say 100% tax on Vegemite sandwiches sales. You can still buy a Vegemite sandwich but it will cost you twice as much.

It's talking about different tax rates for different things, a sales tax can be anything on a scale of minus to zero to infinity. How many Vegemite sandwhiches would be sold if the tax on one sandwhich was a million dollars? How many sandwhiches would be sold if the govt gave the person buying it a million dollars? At some point for the sales tax your base * rate will have a maximum. The argument is where the maximum is.

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So if the government taxed at 100% tax rate people would turn over 100% of their income and all money would go to the government and none to the people?

I agree with Loren. It's silly at the state level to believe that a 1 or 2% drop in tax rates would be switching the curve. But that doesn't mean that all taxes are that case.

To expand a bit, the Laffer curve is obviously true, or nearly so, at its endpoints (0% and 100%).

In between the empirical evidence shows it bears little resemblance to reality, and there is no a priori reason to think such a curve, if it existed, would be a parabola.

I agree it's not a curve, it's a step function with different sized and unknown steps. It's like drawing the revenue curve of a McDonalds cheeseburger, it hard to know the exact amounts at each.

 

[Nice Squirrel]

Depends on what kind of tax it is.

Let's say 100% tax on Vegemite sandwiches sales. You can still buy a Vegemite sandwich but it will cost you twice as much.

It's talking about different tax rates for different things, a sales tax can be anything on a scale of minus to zero to infinity. How many Vegemite sandwhiches would be sold if the tax on one sandwhich was a million dollars?

Why would this matter? The 100% tax rate would still double the price.

 

[Jimmy Higgins]

Depends on what kind of tax it is.

Let's say 100% tax on Vegemite sandwiches sales. You can still buy a Vegemite sandwich but it will cost you twice as much.

It's talking about different tax rates for different things, a sales tax can be anything on a scale of minus to zero to infinity. How many Vegemite sandwhiches would be sold if the tax on one sandwhich was a million dollars? How many sandwhiches would be sold if the govt gave the person buying it a million dollars? At some point for the sales tax your base * rate will have a maximum. The argument is where the maximum is.

The only people having that argument are the people who support non-sustainable tax policies. We are obviously not near the maximum, so where the maximum is, may be about as important as "Which part of the sun is the brightest?" when discussing whether to have a picnic.

So if the government taxed at 100% tax rate people would turn over 100% of their income and all money would go to the government and none to the people?

I agree with Loren. It's silly at the state level to believe that a 1 or 2% drop in tax rates would be switching the curve. But that doesn't mean that all taxes are that case.

To expand a bit, the Laffer curve is obviously true, or nearly so, at its endpoints (0% and 100%).

In between the empirical evidence shows it bears little resemblance to reality, and there is no a priori reason to think such a curve, if it existed, would be a parabola.

I agree it's not a curve, it's a step function with different sized and unknown steps. It's like drawing the revenue curve of a McDonalds cheeseburger, it hard to know the exact amounts at each.

It isn't a step function. It isn't any function that can be developed as there are an incalculable number of unknowns to arrive at such an algorithm.

 

[jonatha]

I agree it's not a curve, it's a step function with different sized and unknown steps. For the past few days, it has been very easy to produce a CE. We have been get one on the subsequent

If you look at Gardner's original curve (the one based on historical data in the US, not the one shown earlier in the thread attributed to him), you'll see it's not a step function either.

The thing is resembles most closely is a simplified drawing of the Flying Spaghetti Monster.

 

[Loren Pechtel]

So if the government taxed at 100% tax rate people would turn over 100% of their income and all money would go to the government and none to the people?

I agree with Loren. It's silly at the state level to believe that a 1 or 2% drop in tax rates would be switching the curve. But that doesn't mean that all taxes are that case.

To expand a bit, the Laffer curve is obviously true, or nearly so, at its endpoints (0% and 100%).

In between the empirical evidence shows it bears little resemblance to reality, and there is no a priori reason to think such a curve, if it existed, would be a parabola.

Why in the world wouldn't it be at least akin to a parabola?

The wiggly-line graph above proves nothing as it's simply looking at the top tax rate, not the overall tax rate.

 

[Nice Squirrel]

To expand a bit, the Laffer curve is obviously true, or nearly so, at its endpoints (0% and 100%).

In between the empirical evidence shows it bears little resemblance to reality, and there is no a priori reason to think such a curve, if it existed, would be a parabola.

Why in the world wouldn't it be at least akin to a parabola?

Why would it be?

 

[coloradoatheist]

It's talking about different tax rates for different things, a sales tax can be anything on a scale of minus to zero to infinity. How many Vegemite sandwhiches would be sold if the tax on one sandwhich was a million dollars?

Why would this matter? The 100% tax rate would still double the price.

I was talking about 100% income tax at a state level, not a 100% sales tax. But the amount of sales tax that and revenue does depend on the elasticity of the items being sold and their sales tax.

 

[Bronzeage]

So many things are made in other countries these days, which means that when taxes are cut, the extra money is largely spent on economic activity elsewhere. Or else it is pocketed.

As a former small businessman/job creator, I can say two things about tax cuts and their effect on the economy. First, one has to have large profits, before a tax cut has any real effect on operating practices, and second, the effect is more likely to be a reduction in debt, which reduces interest payments on lines of credit, and unlikely to be used to reinvest in capital outlay, or new hiring.

The cash value of the tax cut goes straight to a bank's bottom line, who is also benefiting from the tax cut.

There is no investment which creates new wealth, which produces taxable income.

The problem with all of these trickle down get government off the people's backs tax reform plans is that no one ever steps up and says that it means a reduction in the standard of living for most of the tax payers. If State government got out of the business of things like healthcare, infrastructure, and schools, and let local government do whatever they could afford, tax rates could revert to pre Spanish American War levels.

Governments were instituted because it was many years ago that we realized, the wealthy will pay to educate their own children, but not anyone else's children. The same goes for all the other things government does in a first world country.

 

[jonatha]

The wiggly-line graph above proves nothing as it's simply looking at the top tax rate, not the overall tax rate.

The wiggly-line graph above is not Gardner's curve, which was generated from decades of data on actual US tax receipts vs. actual US tax rates and, as I said, bears a strong resemblance to the FSM...

 

[bilby]

Depends on what kind of tax it is.

Let's say 100% tax on Vegemite sandwiches sales. You can still buy a Vegemite sandwich but it will cost you twice as much.

It's talking about different tax rates for different things, a sales tax can be anything on a scale of minus to zero to infinity. How many Vegemite sandwhiches would be sold if the tax on one sandwhich was a million dollars? How many sandwhiches would be sold if the govt gave the person buying it a million dollars? At some point for the sales tax your base * rate will have a maximum. The argument is where the maximum is.

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So if the government taxed at 100% tax rate people would turn over 100% of their income and all money would go to the government and none to the people?

I agree with Loren. It's silly at the state level to believe that a 1 or 2% drop in tax rates would be switching the curve. But that doesn't mean that all taxes are that case.

To expand a bit, the Laffer curve is obviously true, or nearly so, at its endpoints (0% and 100%).

In between the empirical evidence shows it bears little resemblance to reality, and there is no a priori reason to think such a curve, if it existed, would be a parabola.

I agree it's not a curve, it's a step function with different sized and unknown steps. It's like drawing the revenue curve of a McDonalds cheeseburger, it hard to know the exact amounts at each.

There is absolutely no reason to assume that there is a single maximum, or that the local maxima remain at one place over time. Indeed, there's every reason to expect that the location and number of the peak(s) will vary considerably and unpredictably over time.

Even if you could capture the location of a maximum at some point in time, any policy shift to move towards that maximum revenue point will likely find that by the time the policy is implemented, the maximum is no longer there.

 

[Deepak]

Why in the world wouldn't it be at least akin to a parabola?

I think it's generally accepted that Laffer's claims are hyperbolic...

 

[Loren Pechtel]

Why in the world wouldn't it be at least akin to a parabola?

Why would it be?

The basic principal: Taxes will reduce the incentive to make money. That's basically uncontested, the only question is how much suppression comes from what tax rate. Now, there are no sharp lines in the driving force, thus the curve should be smooth.

At 0% it's obvious that the tax collected is zero.

At low levels the suppression effect is small, thus the line rises. If there were no suppression effect this would be a straight line but the suppression effect will pull the line down from that--you get the first part of the parabola.

Eventually you reach a point where the suppression effect brings the size of the pie down as much as the tax rate increases the take, you have the top of the parabola.

Beyond this point the suppression effect dominates, we have basically the reverse of what we saw on the way up. Other than tax avoidance/evasion schemes we hit zero again at 100%--why work if you won't keep any of the result?

You will only get a perfect parabola if the peak is at 50% but it will look similar if the peak is anywhere except right near one of the ends (and that case isn't likely.)

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The wiggly-line graph above proves nothing as it's simply looking at the top tax rate, not the overall tax rate.

The wiggly-line graph above is not Gardner's curve, which was generated from decades of data on actual US tax receipts vs. actual US tax rates and, as I said, bears a strong resemblance to the FSM...

We have no situation where the tax rates were changed substantially without the tax code also being changed substantially in other ways. Thus trying to plot the Laffer curve from them is meaningless.

 

[Nice Squirrel]

Why would it be?

The basic principal: Taxes will reduce the incentive to make money. That's basically uncontested, the only question is how much suppression comes from what tax rate. Now, there are no sharp lines in the driving force, thus the curve should be smooth.

To quote Bernie Madoff, "I've never heard an investor say 'I'm not going to invest because of the tax rate'." There is no reason to expect a parabola. It could just as easily be a flat line or a series of steps. There is no reason to expect a smooth parabolic line and the real world examples support this.

 

[jonatha]

We have no situation where the tax rates were changed substantially without the tax code also being changed substantially in other ways. Thus trying to plot the Laffer curve from them is meaningless.

What the curve does have is many situations where neither the rates nor the code changed, but the tax take did, flouting the Aristotelian notion that there must be a curve, that it must be a parabola, and that it must be smooth...