tag:blogger.com,1999:blog-22468479.post7923014801683283781..comments2024-03-13T03:16:31.400-04:00Comments on Pushing Rope: Pop QuizMichael Husseyhttp://www.blogger.com/profile/10798917783817126218noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-22468479.post-11078592340449220422007-09-06T17:46:00.000-04:002007-09-06T17:46:00.000-04:00Vreg, you are correct. I stated it wrong. Which ma...Vreg, you are correct. I stated it wrong. Which makes Laffer's theory more troubling. The more people are taxed the more they will have to work. Ofcourse, if taxes are at 100% it would be counterproductive to work.Michael Husseyhttps://www.blogger.com/profile/10798917783817126218noreply@blogger.comtag:blogger.com,1999:blog-22468479.post-69825520544688808202007-09-06T17:37:00.000-04:002007-09-06T17:37:00.000-04:00You are correct. It is the Laffer curve.You are correct. It is the Laffer curve.Michael Husseyhttps://www.blogger.com/profile/10798917783817126218noreply@blogger.comtag:blogger.com,1999:blog-22468479.post-67813795196457861802007-09-06T13:30:00.000-04:002007-09-06T13:30:00.000-04:00That's the Laffer Curve. Its part of supply side ...That's the Laffer Curve. Its part of supply side economics and supposedly was used to convince Dick Cheney of that theory.<BR/><BR/>You explained it wrong. Conservatives (really, proponents of supply-side economics, they don't have to be conservative) argue that the lower taxes are, the MORE people will work, since they get to keep more of their own money. However, reducing taxes all the way means no money for the government. Likewise, at 100% taxation, no one has any reason to work, since all the profit would go to the government, and so revenue is also zero. The idea is that somewhere in between 0% and 100% taxation is the perfect balance between encouraging work (really, not work but profit-generating activity, which could be investments, rents, etc.) with low taxes and raising revenue for the state with "high" taxes. The equilibrium point (which your picture suggests is at 50%, but according to supply side economists would be much closer to 0%) thus maximizes revenue for the state - any higher and profit is discouraged, and lower and the extra profit isn't benefiting the state.<BR/><BR/>It's flawed because A) people aren't self-interested economic machines and B) it oversimplifies by assuming that the best/only way to encourage profit-making is an abstract tax percentage, and that there is only one equilibrium point.Anonymousnoreply@blogger.com