Taxes and Revenue

For those who have wondered, if more taxes raise more money, then is 100% the ideal tax rate, here are some answers.

It was hard to believe that, in all the years that the government has been collecting taxes and trying to balance budgets, that someone had not looked in to what might be the ideal tax rate. It turns out that someone did. Artur Laffer developed something called the Laffer Curve which seeks to define the ideal tax rate. Before writing this post, I did a Google Search for "Laffer Curve". Not surprisingly, there are people who think it is accurate, and people who think it is bogus.

On the Conservapedia site, there is a great quote from JFK. President John F. Kennedy explained the principle behind the Laffer Curve in his address to the Economic Club of New York on December 14, 1962: “In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.” 

There is a great web page that attempts to define the ideal point on the Laffer Curve. On it there are three great videos describing the Laffer Curve. Kudos to Dan Mitchell for seeing the need and making the videos. Dan Mitchell is a member of the Cato Institute.

Part One: The Theory of the Laffer Curve:



Part Two: Reviewing the Evidence.



Part Three: Dynamic Scoring.



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