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Home - by - December 1, 2012 - 21:00 America/New_York - 10 Comments

Cato Institute

Daniel J. Mitchell

Being a thoughtful and kind person, I offered some advice last year to Barack Obama. I cited some powerful IRS data from the 1980s to demonstrate that there is not a simplistic linear relationship between tax rates and tax revenue.

In other words, just as a restaurant owner knows that a 20-percent increase in prices doesn’t translate into a 20-percent increase in revenue because of lost sales, politicians should understand that higher tax rates don’t mean an automatic and concomitant increase in tax revenue.

This is the infamous Laffer Curve, and it’s simply the common-sense recognition that you should include changes in taxable income in your calculations when trying to measure the impact of higher or lower tax rates on tax revenues.

No, it doesn’t mean lower tax rates “pay for themselves” or that higher tax rates lead to less revenue. That only happens in unusual circumstances. But it does mean that lawmakers should exercise some prudence and judgment when deciding tax policy.

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» 10 Comments

  1. Menderman

    December 1st, 2012

    “lawmakers should exercise some prudence and judgment when deciding…”

    Yeah, and if a frog had wings he wouldn’t bump his ass on the ground every time he landed.

    Anytime a “good” politician makes it to DC, the currupt majority re-district his ass to exile. Career politicians don’t want to upset the apple cart.

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  2. Marry John Grab Ankles

    December 1st, 2012

    Liberal’s don’t use rational thinking and especially not transitive logic like A=>B, B=>C thus A=>C they don’t get that — they do know how to party hard and prescribe decadence while trying to push Christianity and our beloved institutions like Marriage out of our civil society.

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  3. Menderman

    December 1st, 2012

    This is how tax policy really works. Obama passed about $780 billion in stimulus spending in the 2010 budget and that was the last budget that actually passed Congress. The way the rules work, there is an atomatic ~7% increase on the federal budget every year. Since no budget has passed since then, the “continuing resolutions” each year just keep adding to that inflated baseline. Some how in 2008 we got everything done with a $2.9 trillion, but in 2010 it was $3.8 trillion…and has been almost that every year. That extra trillion or so is Obama’s vote buying money, and it works. It works because every politician gets his share of the pie to buy his district. If you want to see the budget get anywhere near sane again, put an R in the Oral office, and the MSM will be back to the horror stories of runaway spending…

    (my numbers and dates are from memory…and are not exact, but you get the point)

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  4. reliapundit

    December 1st, 2012

    THE MOST REVENUE THE US TREASURY EVER RECEIVED WAS IN 2007 UNDER THE BUSH TAX RATES.

    MORE THAN EVER RECEIVED UNDER CLINTON OR OBAMA OR ANYONE ELSE. EVER.

    IF WE WANT TO INCREASE FEDERAL REVENUE TO CLOSE THE DEFICIT, THEN WE HAVE TO GROW THE ECONOMY.

    PERIOD.

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  5. Nutjob

    December 1st, 2012

    Hell even Turbotax-timmy doesn’t understand this BFH, and just like you I’ve explained to libs about everyone common sense approach/explanation/reasoning possibly known to man……these dumb fucks just don’t get it.

    The sad thing is in Darwins theory we are all now all doomed. Instead of survival of the fittest, we are now all victims of the dumbest.

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  6. Eric

    December 2nd, 2012

    concomitant? What the f*ck does that mean?

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  7. Stranded in Sonoma

    December 2nd, 2012

    Most liberals do not understand this basic concept: a 0% tax rate will bring in zero revenue and a 100% tax rate will also bring in zero revenue. People aren’t going to work just to see the gov’t take everything.

    Since that is true, the line on the graph of revenue increases relative to tax rate increases must bend back and head toward zero revenue as you increase the tax rate.

    There are some that do understand this. And they still want to raise tax rates. Which means taxes aren’t about revenue, they’re about punishment.

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  8. Roadmaster

    December 2nd, 2012

    THEY DON’T CARE! THEY DON’T CARE! THEY DON’T CARE! THEY DON’T CARE! THEY DON’T CARE! THEY DON’T CARE! THEY DON’T CARE! THEY DON’T CARE!

    That’s what I’ve decided after seeing truth/facts/proof all these years. Congresscreeps aren’t about the “saving” – they’re about the spending. Obama isn’t about the poor people (he really could care less) – he’s about punishing the “rich” which he even admitted is bad policy, but it’s about “fairness.”

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  9. Xavier

    December 2nd, 2012

    Barry’s got a dual goal with taxing the rich: Punishing the rich is a way to promote class warfare, and it opens the door to raising taxes on the middle class. There’s no secret motive here: like any politicians, they want to stay in office and wield power – both of which require massive amounts of money. The poor don’t have much money for the government to steal, and some people actually realize that the rich, taken as a whole, don’t have enough money to run the government more than a few days. That leaves the middle class to provide the revenue the government wants. 16T of debt, no budget, and a fiscal cliff says the middle class is about to get buttfucked.

    We can talk about socialism and wealth redistribution and fairness etc but those are just structures used to retain power and finance an all encompassing government. The administration’s real goal is to stay in office and live in luxury; they have no social ideology or grand philosophy – it’s just garden variety greed, plain and simple.

    Most Americans believe the disinformation spread by the MSM. If the public knew the truth about the country’s economic condition and the administration’s looting of our personal property we’d be in open revolt. I’m not as smart as Ann Barnhardt and can’t predict the future. But it’s clear to me that Barry and his minions are going to suck every bit of wealth out of this country, destroying it in the process.

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  10. Mz BallBreaker

    December 3rd, 2012

    History documented what happened in Tsarist Russia in 1917….the “government” (the Tsar) ignored the people, took all they had, and bingo….revolution and execution of the royal family. History repeats itself.

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