Yes, there are a number of examples of the curve out there and its also probably different by country and individual but the general idea that as the tax rate increases people look for ways to avoid paying it stands.
Yes, everything is a trade off. I've lived for years in both the US and Canada and which is better comes down to your individual priorities.
Responding specifically to the section of your article on the Laffer Curve and any questions about its legitimacy - while it's true that its shortcoming lies in its inability to predict exactly what taxed percentage of income triggers declining revenue, that doesn't change the indisputable fact that it will at some point.
I've covered similar ground in my book, A White Man's Perspectives on Race and Racism. This is excerpted from chapter 8 - Entitlements:
In much the same way that Communism disincentivizes societal progress (Capitalist greed might be ugly sometimes, but financial rewards are usually the chief motivating factor in striving for success), excessive entitlements also have the effect of stifling society’s advancements long term. Free money removes motivation; aside from the lucky few who are passionate about their careers, most people work solely to get ahead financially. As entitlements expand and become accessible to greater numbers of people, those who receive them grow as a voter force, which manipulates legislation towards further expansion of benefits. As their numbers continue to grow, the comparative numbers of those who work to contribute and finance such entitlements shrink, fewer and fewer paying for more and more.
Accordingly, their collective motivation drops, in what is seen as a fruitless effort to work in support of others. The uber wealthy, who many would like to see foot the bills for this, remain insulated because they can flee the country or keep their money in protected overseas accounts. But this especially applies to those on the economic borderline - if you earn $40,000 a year working, but can receive welfare, housing, food stamps, and medical benefits worth nearly that much to stay home, you’re more likely to quit and ride the system.
We saw something similar to this with expanded unemployment and supplement checks during Covid - many people milked those benefits out as long as possible and the national workforce dissipated, creating havoc on supply chains and, by extension, the nation’s economy. Mathematically, the numbers of taxpaying contributors will decrease to the point where the recipients are in line to receive more than can be supplied. It is an unsustainable model as currently constructed, where politicians trash the future to buy votes today, and it helps contribute to the comparative lack of socioeconomic progress amongst minorities.
Thanks for the comment ZL. Yes, the Laffer Curve provides a high level description for what happens as taxes rise. It's true, there just isn't a mathematical formula that can be used to tell us where revenue starts to decline.
Your description of entitlements makes me wonder if there's a curve that would describe the effort workers put out based on the level of entitlements. A sort of "reverse Laffer Curve" if you will. It also brings to mind this quote by Alexander Fraser Tytler:
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years. These nations have progressed through this sequence: From bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to apathy; From apathy to dependence; From dependence back into bondage.”
The question proposed to ask liberals if 100% tax is too much reminds me of the response Will Smith gave to a French interviewer. He went from, "I have nonissues paying taxes," to, after being informed France top rate is 75%, "75! Well, that's something different. God bless America."
Very insightful, man you brought it full circle! You’re so right when you look at the value of land in 1860! That wasn’t what built America 🇺🇸! Thank you ! Art Laffler is right on with he’s laffler curve, lowering taxes brings up productivity for every aspect of industry! Thank again!
Good on you sir, I did enjoy this. The problems when dealing with issue like the is the simplicity of it-which you guided to-trying to sum up multivariable subjects to a single outcome is self defeating a lot of times. Subjects such as: taxes, slavery, race, inflation, climate, all fall under this and trying to simplicity the issue with a summary to policy makers simplicity does not suffice
Thanks for the comment and for reading Pablo. I have some sympathy for trying to deal with complex topics given that I try to keep my posts under 2000 words. However, academics write very long books about these topics and there is no excuse for some of the mistakes (?) they make.
It's worth noting that the Laffer curve varies wildly by country. A while back I had a discussion with a civil service friend. Unsurprisingly, he argued for a 'tax the rich' approach to raising government revenue. I looked at the issue and found a study from Spain, where faith in government is probably somewhat stronger than in most of the Anglosphere. The study found that revenue began to fall steeply in Spain below an income tax rate of 28% and above a rate of 60%.
The worst form of tax in terms of the Laffer curve is undoubtedly the inheritance tax, because of the capital flight it encourages (although wealth taxes seem to be comparable). It's why Sweden abolished theirs. The most any country has been able to raise from inheritance taxes is around 0.6% of total revenue, with a few notable exceptions- although the figure has recently shifted upwards to around 0.8% of revenue- probably a sign of more middle and upper middle class boomers dying as homeowners (a home being the one type of asset it's difficult to offshore).
Anyway, the evidence from Sweden shows that the lack of an inheritance tax is more than made up for by increases in revenue from corporation tax and cap gains. In the period I looked at US revenue from corporation tax was 1.1% of total revenue, revenue from corporation tax was 1.8% of total revenue in the UK, and in Sweden revenue from corporation tax was 2.7% of total revenue- and that's before one even considers cap gains.
I agree that country (read: culture) will have an impact on the curve making it difficult to use as anything but a high level concept. The general idea being that tax payers perform some type of mental cost benefit analysis. Few people are going to put much effort into avoiding a 1% tax but change it to 25% to 50% and...
I'm not a fan of either inheritance taxes or corporate taxes but if they're necessary I'd keep them low. Inheritance taxes are a political tool to show that the rich are paying their "fair" share. After a life of paying taxes on income, investments, and purchases it's just one last grasp by the government. I think corporate taxes are just passed along to the customer so view them in a similar light.
VAT taxes are better IMHO. As a tool they can be geared to exclude some goods (food, products), have a lower rate for some other essentials (electricity, heating oil) and then the normal rate for general consumer goods. Most advanced economies have VAT in one form or another. Some corporation tax can be a good thing- in a competitive landscape it provides another form of incentive for companies to invest in capital expenditure for the write-off. I also think there is a problem at the bottom of the individual comparative advantage stakes- if employers had major tax incentives to classify specific jobs as for the disabled or cognitively challenged, those in the latter group might be significantly less likely to end up in prison, but it's only a pool of 50% of potential offenders because the other half score very low on the ASPD spectrum, manifest untreatable chronic physical aggression as children or fall into the dark tetrad.
Inheritance tax is by far the worst form of tax, because, despite the fact that it's a vanity tax the sole value of which is Left political theatre, it's also the tax most likely to cause capital flight.
'After a life of paying taxes on income, investments, and purchases it's just one last grasp by the government.' Agreed, and downright counterproductive for generating revenue on anything apart from real estate inheritances- in other words, it's a tax the middle classes pay the most on, as a percentage of net worth at death.
'I think corporate taxes are just passed along to the customer so view them in a similar light.'
Here's the problem. The Laffer curve on income tax is fairly brutal beyond 33%. The most generous study I could find was from Spain, which showed that total revenue received declined precipitously below 28% and above 60%. The other thing to consider is that property taxes should probably be considered in this figure, as well as any state income taxes. And it's not just tax avoidance (as opposed to evasion). Why work longer hours when you're paying two-thirds? Why not retire with your pot of gold to a place in the sun? My point would be if there is a substantial revenue shortfall, then corporation taxes and VAT are the two best sources to go to, because they cause the least broader economic damage. Last time I checked America was running at 43% of GDP, once one includes state and local. Australia was 38%. Most of Western Europe is 50% or above.
One of the things I always enjoy telling Leftists about is the fact that Nordic Model countries like Sweden don't have the income taxes outsiders believe, because 30% of debt interest on loans or mortgages is repaid through the tax system as a rebate. They also have pretty high wealth inequality, for obvious behavioural reasons. I live in the UK, but my brother lives in Sweden with his wife. Whenever I think I've thought up something really smart on tax policy I find out the Swedes have already done it. Their welfare system basically operates like a negative income system, for example, which is basically like a stronger version of EITC with a few extra provisions for children.
Is there a similar curve regarding the utility of the dollars taxed and spent by government? Is there a law of diminishing utility of government dollars?
That's a good question. Unfortunately, I don't have the depth of knowledge on the topic to answer it. I would imagine waste increases as the dollars collected rise, but I don't know if the percentage wasted would increase at a quicker rate. Perhaps another reader will see your question and help us out.
Slaves didn’t build anything. They picked cotton. They made some white men rich, they did not build America. Ridiculous, did they also fight and defeat the south with no help? Did they send a man to the moon by themselves? Did they invent western culture too? Are we just gonna act like slaves were hero’s? They weren’t, they were normal folks dealt a bad hand in life. Those days are gone, get over it.
Excellently done, speaking as someone who has studied the WBTS pretty deeply and who has worked on Wall Street and understand the numbers. I’m now a sub. Look forward to reading more of your stuff.
Excellent. Well done. I just happened across a dimwit today that hated pdt so bad, because of his tax cuts for the rich. Because they only benefitted those at the 50% and above level. Those who actually pay taxes. lol
If Cotton was King, the South would have won the war.
It took Britain basically no time at all to find other sources of cotton. Things were tough for like a year or two but not enough that they were going to fight a war over it.
Slavery did make a few people, especially near Mississippi River in the 1840s/50s, very rich. They mostly spent this wealth on conspicuous consumption, then it all got burned down in the war.
Yes, two good points. If the South's cotton had been that important to Britain they would have entered the war on the South's side.
In many ways the South was an aristocratic society with the rich slave owners doing very well and everyone else (who wasn't a slave) just getting by. An agrarian aristocracy society is no match for an industrial capitalist one and is one of the reasons why the South tried to knock out the North quickly by invading.
The most intelligent pro-slavery commentators of what would become the Confederacy, such as Calhoun and Fitzhugh, were also explicitly anti-capitalist in their justifications of slavery. They were in this respect completely right, as the overseer's whip is the only way to ensure an avoidance of shirking in a non-capitalist system, which is needed to keep society's vital organs humming along. This logic would be taken to savage new heights under the Bolsheviks and their successor regimes, and is the only way for non-capitalist societies to avoid going the way of Jamestown.
If anything, socialism exacerbates the worst features of slavery by abolishing mastery and leaving behind a society consisting of nothing but slaves and overseers. Ownership is by far the best means to which anything is ever treated of value, and to abolish it would be to build a society where nothing has any value.
Apparently 37 million Americans are getting SNAP that’s food stamps. That’s a subsidy for Walmart but Walmart family is extremely wealthy
I doubt the real Laffer curve would be symmetrical
Frankly under Biden my rent jumped 30 percent in two years
That was a nationwide thing
And corporations have the highest profits ever
There are enormous layoffs in tech and jobs being offshored
I think some deal was made by the democrats to led the oligarchs run wild
I have started looking at other countries to retire in
Living in America is very expensive and not very good
Even Switzerland is expensive but it’s good
Same with Singapore expensive and good
America is expensive
and not good a very bad combination
There are many countries that are cheaper and better lol
Yes, there are a number of examples of the curve out there and its also probably different by country and individual but the general idea that as the tax rate increases people look for ways to avoid paying it stands.
Yes, everything is a trade off. I've lived for years in both the US and Canada and which is better comes down to your individual priorities.
Thanks for reading David!
I guess I need to try the nomad tourist thing for a while. I have lived in Canada and USA but not in Canada for decades. So may have changed a lot
Responding specifically to the section of your article on the Laffer Curve and any questions about its legitimacy - while it's true that its shortcoming lies in its inability to predict exactly what taxed percentage of income triggers declining revenue, that doesn't change the indisputable fact that it will at some point.
I've covered similar ground in my book, A White Man's Perspectives on Race and Racism. This is excerpted from chapter 8 - Entitlements:
In much the same way that Communism disincentivizes societal progress (Capitalist greed might be ugly sometimes, but financial rewards are usually the chief motivating factor in striving for success), excessive entitlements also have the effect of stifling society’s advancements long term. Free money removes motivation; aside from the lucky few who are passionate about their careers, most people work solely to get ahead financially. As entitlements expand and become accessible to greater numbers of people, those who receive them grow as a voter force, which manipulates legislation towards further expansion of benefits. As their numbers continue to grow, the comparative numbers of those who work to contribute and finance such entitlements shrink, fewer and fewer paying for more and more.
Accordingly, their collective motivation drops, in what is seen as a fruitless effort to work in support of others. The uber wealthy, who many would like to see foot the bills for this, remain insulated because they can flee the country or keep their money in protected overseas accounts. But this especially applies to those on the economic borderline - if you earn $40,000 a year working, but can receive welfare, housing, food stamps, and medical benefits worth nearly that much to stay home, you’re more likely to quit and ride the system.
We saw something similar to this with expanded unemployment and supplement checks during Covid - many people milked those benefits out as long as possible and the national workforce dissipated, creating havoc on supply chains and, by extension, the nation’s economy. Mathematically, the numbers of taxpaying contributors will decrease to the point where the recipients are in line to receive more than can be supplied. It is an unsustainable model as currently constructed, where politicians trash the future to buy votes today, and it helps contribute to the comparative lack of socioeconomic progress amongst minorities.
So, basically, I agree with you, Philip.
ZL
Thanks for the comment ZL. Yes, the Laffer Curve provides a high level description for what happens as taxes rise. It's true, there just isn't a mathematical formula that can be used to tell us where revenue starts to decline.
Your description of entitlements makes me wonder if there's a curve that would describe the effort workers put out based on the level of entitlements. A sort of "reverse Laffer Curve" if you will. It also brings to mind this quote by Alexander Fraser Tytler:
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years. These nations have progressed through this sequence: From bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to apathy; From apathy to dependence; From dependence back into bondage.”
I’m trying to get one now. Having a lot of problems completing the order 🤨…
The question proposed to ask liberals if 100% tax is too much reminds me of the response Will Smith gave to a French interviewer. He went from, "I have nonissues paying taxes," to, after being informed France top rate is 75%, "75! Well, that's something different. God bless America."
https://youtu.be/hs3NzBx5ei0?si=-EOKTt0b5xfRyJvf
lol. Everyone has a problem with taxes, the question is at what rate does it kick in?
Progressive is blinded by money and fame!
Very insightful, man you brought it full circle! You’re so right when you look at the value of land in 1860! That wasn’t what built America 🇺🇸! Thank you ! Art Laffler is right on with he’s laffler curve, lowering taxes brings up productivity for every aspect of industry! Thank again!
You're welcome Mike. Thanks for reading.
See my essay at momanddadmatters.substack.com which dovetails but adds nuance wrt president quack speed.
Good on you sir, I did enjoy this. The problems when dealing with issue like the is the simplicity of it-which you guided to-trying to sum up multivariable subjects to a single outcome is self defeating a lot of times. Subjects such as: taxes, slavery, race, inflation, climate, all fall under this and trying to simplicity the issue with a summary to policy makers simplicity does not suffice
Thanks for the comment and for reading Pablo. I have some sympathy for trying to deal with complex topics given that I try to keep my posts under 2000 words. However, academics write very long books about these topics and there is no excuse for some of the mistakes (?) they make.
This is great Phillip. More please!
Thanks for reading! I'm working on it. ;)
It's worth noting that the Laffer curve varies wildly by country. A while back I had a discussion with a civil service friend. Unsurprisingly, he argued for a 'tax the rich' approach to raising government revenue. I looked at the issue and found a study from Spain, where faith in government is probably somewhat stronger than in most of the Anglosphere. The study found that revenue began to fall steeply in Spain below an income tax rate of 28% and above a rate of 60%.
The worst form of tax in terms of the Laffer curve is undoubtedly the inheritance tax, because of the capital flight it encourages (although wealth taxes seem to be comparable). It's why Sweden abolished theirs. The most any country has been able to raise from inheritance taxes is around 0.6% of total revenue, with a few notable exceptions- although the figure has recently shifted upwards to around 0.8% of revenue- probably a sign of more middle and upper middle class boomers dying as homeowners (a home being the one type of asset it's difficult to offshore).
Anyway, the evidence from Sweden shows that the lack of an inheritance tax is more than made up for by increases in revenue from corporation tax and cap gains. In the period I looked at US revenue from corporation tax was 1.1% of total revenue, revenue from corporation tax was 1.8% of total revenue in the UK, and in Sweden revenue from corporation tax was 2.7% of total revenue- and that's before one even considers cap gains.
Hi Geary, thanks for the reply.
I agree that country (read: culture) will have an impact on the curve making it difficult to use as anything but a high level concept. The general idea being that tax payers perform some type of mental cost benefit analysis. Few people are going to put much effort into avoiding a 1% tax but change it to 25% to 50% and...
I'm not a fan of either inheritance taxes or corporate taxes but if they're necessary I'd keep them low. Inheritance taxes are a political tool to show that the rich are paying their "fair" share. After a life of paying taxes on income, investments, and purchases it's just one last grasp by the government. I think corporate taxes are just passed along to the customer so view them in a similar light.
VAT taxes are better IMHO. As a tool they can be geared to exclude some goods (food, products), have a lower rate for some other essentials (electricity, heating oil) and then the normal rate for general consumer goods. Most advanced economies have VAT in one form or another. Some corporation tax can be a good thing- in a competitive landscape it provides another form of incentive for companies to invest in capital expenditure for the write-off. I also think there is a problem at the bottom of the individual comparative advantage stakes- if employers had major tax incentives to classify specific jobs as for the disabled or cognitively challenged, those in the latter group might be significantly less likely to end up in prison, but it's only a pool of 50% of potential offenders because the other half score very low on the ASPD spectrum, manifest untreatable chronic physical aggression as children or fall into the dark tetrad.
Inheritance tax is by far the worst form of tax, because, despite the fact that it's a vanity tax the sole value of which is Left political theatre, it's also the tax most likely to cause capital flight.
'After a life of paying taxes on income, investments, and purchases it's just one last grasp by the government.' Agreed, and downright counterproductive for generating revenue on anything apart from real estate inheritances- in other words, it's a tax the middle classes pay the most on, as a percentage of net worth at death.
'I think corporate taxes are just passed along to the customer so view them in a similar light.'
Here's the problem. The Laffer curve on income tax is fairly brutal beyond 33%. The most generous study I could find was from Spain, which showed that total revenue received declined precipitously below 28% and above 60%. The other thing to consider is that property taxes should probably be considered in this figure, as well as any state income taxes. And it's not just tax avoidance (as opposed to evasion). Why work longer hours when you're paying two-thirds? Why not retire with your pot of gold to a place in the sun? My point would be if there is a substantial revenue shortfall, then corporation taxes and VAT are the two best sources to go to, because they cause the least broader economic damage. Last time I checked America was running at 43% of GDP, once one includes state and local. Australia was 38%. Most of Western Europe is 50% or above.
One of the things I always enjoy telling Leftists about is the fact that Nordic Model countries like Sweden don't have the income taxes outsiders believe, because 30% of debt interest on loans or mortgages is repaid through the tax system as a rebate. They also have pretty high wealth inequality, for obvious behavioural reasons. I live in the UK, but my brother lives in Sweden with his wife. Whenever I think I've thought up something really smart on tax policy I find out the Swedes have already done it. Their welfare system basically operates like a negative income system, for example, which is basically like a stronger version of EITC with a few extra provisions for children.
https://www.niskanencenter.org/universal-basic-income-is-just-a-negative-income-tax-with-a-leaky-bucket/
Is there a similar curve regarding the utility of the dollars taxed and spent by government? Is there a law of diminishing utility of government dollars?
That's a good question. Unfortunately, I don't have the depth of knowledge on the topic to answer it. I would imagine waste increases as the dollars collected rise, but I don't know if the percentage wasted would increase at a quicker rate. Perhaps another reader will see your question and help us out.
Slaves didn’t build anything. They picked cotton. They made some white men rich, they did not build America. Ridiculous, did they also fight and defeat the south with no help? Did they send a man to the moon by themselves? Did they invent western culture too? Are we just gonna act like slaves were hero’s? They weren’t, they were normal folks dealt a bad hand in life. Those days are gone, get over it.
Thanks for the comment Eric. Given how popular this topic has been I plan on digging into it a bit more in one of my upcoming posts.
Excellently done, speaking as someone who has studied the WBTS pretty deeply and who has worked on Wall Street and understand the numbers. I’m now a sub. Look forward to reading more of your stuff.
Thanks very much Enoch!
Excellent. Well done. I just happened across a dimwit today that hated pdt so bad, because of his tax cuts for the rich. Because they only benefitted those at the 50% and above level. Those who actually pay taxes. lol
Thanks for taking the time to read it Alan.
If Cotton was King, the South would have won the war.
It took Britain basically no time at all to find other sources of cotton. Things were tough for like a year or two but not enough that they were going to fight a war over it.
Slavery did make a few people, especially near Mississippi River in the 1840s/50s, very rich. They mostly spent this wealth on conspicuous consumption, then it all got burned down in the war.
Yes, two good points. If the South's cotton had been that important to Britain they would have entered the war on the South's side.
In many ways the South was an aristocratic society with the rich slave owners doing very well and everyone else (who wasn't a slave) just getting by. An agrarian aristocracy society is no match for an industrial capitalist one and is one of the reasons why the South tried to knock out the North quickly by invading.
The most intelligent pro-slavery commentators of what would become the Confederacy, such as Calhoun and Fitzhugh, were also explicitly anti-capitalist in their justifications of slavery. They were in this respect completely right, as the overseer's whip is the only way to ensure an avoidance of shirking in a non-capitalist system, which is needed to keep society's vital organs humming along. This logic would be taken to savage new heights under the Bolsheviks and their successor regimes, and is the only way for non-capitalist societies to avoid going the way of Jamestown.
If anything, socialism exacerbates the worst features of slavery by abolishing mastery and leaving behind a society consisting of nothing but slaves and overseers. Ownership is by far the best means to which anything is ever treated of value, and to abolish it would be to build a society where nothing has any value.
Thanks for the comment H.R.
I plan on digging into the capitalism/slavery topic in a little more depth in an upcoming post.