Supply-Side Economics

[whell]

Originally Posted by finnbow

How can you know where you are on this graph if neither axis has values assigned? For example, can you tell me which exact point on the X axis (what tax rate) provides for maximum revenue? If you can't, you can't logically make an argument that we are at a point on the graph where tax cuts will increase or decrease revenue.

Furthermore, if you even attempt to respond to this, you're admitting that you believe that our economy's health is based solely upon one variable (tax rates) and that monetary policy is fundamentally irrelevant (as are rule of law, corporate governance, corruption, education, worker mobility, innovation ...) Have you ever studied advanced math, statistics or economics? It sure doesn't look like it. The more you try to demonstrate your knowledge of economics, the less it appears you actually understand.

I love your attempt to set up straw dogs. You're truly unmatched on this. I also notice you sidestepped most of the content of my post and focused on a single sentence where you thought you could play "gotcha". Sorry to disappoint.

Let me ask you a question to illustrate how stupid your question is. Look at the Y axis - Revenue. What numbers SHOULD appear there? I think we can agree that the bottom of the axis is zero. But since Laffer never subscribed to your version / explanation of the theory - in other words Laffer never assumed that there was a single variable at work - he never included a value. To know what the minimum and maximum values were, he'd also have to know how much economic activity / capital formation / employment / etc. was going to be produced in any given year. No way to know that. The best the gov't can do is forecast that.

However, is it even arguable that you'll get more capital formation and conversion as the tax rate on capital gains goes down? No. In fact, you guys always WORRY about the this because "the rich" will benefit from it. If there was no positive economic impact from the reduction of taxes on capital, you wouldn't care one way or another.

Now the Y axis. Is it even arguable that as taxes on earnings approach 100%, that revenue from taxes on earnings will go down? If you think that the answer is that revenue from taxes on labor is maximized as the tax approaches 100%, then you should be the last person to suggest that others have a knowledge deficit about economics.