Real World Evidence for the Laffer Curve, even from the Government of Washington, DC

President Obama is proposing a series of major tax increases. His budget envisions higher tax rates on personal income, increased double taxation of dividends and capital gains, and a big increase in the death tax. His health care plan includes significant tax hikes, including the imposition of the Medicare payroll tax on capital income – thus exacerbating the tax code’s bias against saving and investment. It is unclear why the White House is pursuing these punitive policies. The President said during the 2008 campaign that he favored soak-the-rich taxes even if they did not raise revenue, but his budget predicts the proposals will raise lots of additional money.

Because of Laffer Curve reasons, it is highly unlikely that all of this additional revenue will materialize if the President’s budget is approved. The core insight of the Laffer Curve is not that all tax increases lose money and that all tax cuts raise revenues. That only happens in rare circumstances. Instead, the Laffer Curve simply reveals that higher tax rates will lead to less taxable income (or that lower tax rates will lead to more taxable income) and that it is an empirical matter to figure out the degree to which the change in tax revenue resulting from the shift in the tax rate is offset by the change in tax revenue caused by the shift in the other direction for taxable income. This should be an uncontroversial proposition, and was explained in the video from this post. But since many comments and emails expressed disbelief, this video looks at the real world evidence.

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Tags: Art Laffer, Evidence, Income tax, IRS, Laffer
Posted Mar 5th 2010 at 4:21 pm in Congress, Economics, Obama, Tax Reform, Uncategorized | 85146115 Commentshttp://biggovernment.com/dmitchell/2010/03/05/real-world-evidence-for-the-laffer-curve-even-from-the-government-of-washington-dc/Real+World+Evidence+for+the+Laffer+Curve%2C+even+from+the+Government+of+Washington%2C+DC2010-03-06+00%3A21%3A35Dan+Mitchell

The Fox Butterfield Effect and the Laffer Curve

A former reporter for the New York Times, Fox Butterfield, became a bit of a laughingstock in the 1990s for publishing a series of articles addressing the supposed quandary of how crime rates could be falling during periods when prison populations were expanding. A number of critics sarcastically explained that crimes rates were falling because bad guys were behind bars and invented the term “Butterfield Effect” to describe the failure of leftists to put 2 + 2 together.

We now have a version of the Butterfield Effect in tax policy. Recent IRS data show that rich people earned a record amount of income in 2007 and also faced their lowest effective tax rate in almost two decades. Proponents of soak-the-rich tax policy complain about these developments, but they seem oblivious to the Laffer Curve insight that rich people earned more income in part because tax rates were lower. This video explains how the Laffer Curve works.

Liberals don’t understand that if they penalize the rich with higher tax rates, as President Obama is proposing, they will be disappointed to discover that they collect considerably less revenue than predicted for the simple reason that wealthy taxpayers will respond by earning less taxable income. This Bloomberg excerpt is a good example. The leftist quoted in the article assumes that income is a fixed variable and successful taxpayers will passively endure higher taxes.

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Tags: Art Laffer, Capital Gains, Corporate Income tax, Dividends, Income tax
Posted Mar 1st 2010 at 10:59 am in Congress, Economics, News, Obama, Politics, Tax Reform, Uncategorized | 8242265 Commentshttp://biggovernment.com/dmitchell/2010/03/01/the-fox-butterfield-effect-and-the-laffer-curve/The+Fox+Butterfield+Effect+and+the+Laffer+Curve2010-03-01+18%3A59%3A17Dan+Mitchell

Your Time Is Up, Chuck

At the Washington Cathedral memorial service for conservative icon Jack Kemp last May, many of his loyalists asked the same question: with Kemp’s passing, would his infectious pro-growth optimism also depart our political stage? That profoundly sad day, it certainly seemed possible.

Just eight months later, there is a remarkable potential candidate in the Kemp mold who may oppose – and defeat – uber liberal Sen. Chuck Schumer (D-NY). New York Republican, Conservative and Tea Party leaders are talking up the potential candidacy of CNBC commentator Larry Kudlow, a former advisor to Kemp and Ronald Reagan.

For decades, Chuck Schumer has bullied his way to victory at the polls. He’s a prodigious fundraiser, a tough campaigner, and has long been thought unbeatable. But as former New York Assembly Republican leader John Faso noted recently in the New York Post, Schumer’s “image of invincibility has been fed by the failure of Republicans in New York and Washington to aggressively attack his vulnerabilities.”

Many New Yorkers agree: it is difficult to find a federal legislator as odious as Schumer. He is personally responsible for much of the bad policy that led to the economic melt down of the United States. He stands firmly in favor of health care reform that is bad for New Yorkers and he supports a tax on banks that is poison for the Empire State.

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Tags: Al Qaeda, bank tax, Chuck Schumer, civilian terror trials, CNBC
Posted Feb 12th 2010 at 7:41 am in Congress, Economics, News, Politics, State Politics | 74074140 Commentshttp://biggovernment.com/mcaputo/2010/02/12/your-time-is-up-chuck/Your+Time+Is+Up%2C+Chuck2010-02-12+15%3A41%3A30Michael+Caputo

Obama’s Anti-Capitalist Policies Are Anti-Job and Therefore Anti-Recovery

Amidst polls showing flagging public support, the Obama Administration has decided to address the one poll, among all others, that will determine Obama’s political future: the unemployment rate.  As Scott Rasmussen points out, the unemployment rate has a lot to say in deciding a President’s popularity rating and election results – which is probably why Obama announced he would hold a jobs summit with small business representatives among others.

Speeches and photo-ops, however, won’t change the fact that Obama’s policies are anti-capitalist and therefore anti-job and anti-recovery.

It’s important to note that the secret to capitalism is not all that secret.  It’s right there in the name CAPITALism.   Our system relies on:

• Step 1.  The ability of some to aggregate enough capital, i.e. save money, so that they can . . .
• Step 2.   Invest in productive enterprises, i.e. start or grow businesses which  . . .
• Step 3.   Employ people – people who  . . .
• Step 4.   Have the ability to buy things, i.e. purchasing power (critical in a 70% consumer driven economy) – which in turn  . . .
• Step 5.  Creates profits for sellers and . . .
• Step 6.  Savings – and the cycle renews.

The Left’s political policies, however, are sworn enemies of that simple and effective economic process.

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Tags: Barack Obama, federal stimulus, government intervention, Harry Reid, higher taxes
Posted Nov 25th 2009 at 8:13 pm in Economics, News, Obama, Politics, Uncategorized | 3307476 Commentshttp://biggovernment.com/tdelbeccaro/2009/11/25/obamas-anti-capitalist-policies-are-anti-job-and-therefore-anti-recovery/Obama%E2%80%99s+Anti-Capitalist+Policies+Are+Anti-Job+and+Therefore+Anti-Recovery2009-11-26+03%3A13%3A00Thomas+Del+Beccaro