Saturday, November 28, 2015

The Laffer Curve ... Really?

This Indianapolis Observer was startled to see a column in the latest Indianapolis Business Journal touting the Laffer Curve as the preferable guiding principle in taxation strategies: "The Laffer Curve teaches that trying to soak the rich through high tax rats can backfire...." Really?

Where have Cecil Bohanon and Bill Styring been since Reaganomics burst onto the scene?

Here's one contrary view: "So the Laffer curve says tax cuts for the rich? This isn't going to be funny": "Laffer was an associate of the Reagan administration, which had a staged cut in the marginal higher rate of personal income tax from 70% to 28%. The effect on the budget deficit was also striking. Reagan doubled it to $155 billion and tripled government debt to more than $2trillion."

"The Laffer curve relies on the twin assumptions that the rich create the output in an economy and that they need incentives to choose idleness over work. But there is little evidence to support these hypotheses."

And, a more recent example: "The Laffer Curve has Flatlined"" "Govs. Brownback [Kansas] and Walker [Wisconsin] killed [the Laffer Curve] simply by implementing the theory and proving its lack of success."

And, another view: "The New Laffer Curve Logic and the Lack of Evidence for it" "After being shown again and again that tax cuts don't increase revenues, those who make the Laffer curve argument stopped making the claim...."

Maybe it's time for the IBJ to hire some reality-based columnists!

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