More Laffer Curve Straw‐Man Arguments
A column at the New Yorker’s website regurgitates the silly argument that the Laffer Curve is a myth unless every tax cut yields more revenue to the government:
The supply‐side argument [is] that, in the United States, tax‐rate cuts pay for themselves — that, after cutting taxes, the government actually ends up with more revenue.
As I’ve already explained (here and here), the Laffer Curve only implies more revenue in certain circumstances.
Unfortunately, a lot of Republican politicians don’t fully understand the issue, so they overstate the case and give fodder to those who want to prop up the existing revenue‐estimating system (which is based on the even more absurd notion that changes in tax policy never have any impact on economic performance).
Ironically, the author admits later in the article that the Laffer Curve does exist:
[T]he absurd idea that tax cuts pay for themselves is based on an idea that is not at all absurd, which is that tax rates can have an impact on people’s behavior. Increase taxes too much, and people may work less (since they get to keep less of the income they earn) and invest less (since their gains will be taxed more heavily), and so the economy will grow more slowly. The opposite can happen if you cut taxes. (How much of an impact tax rates have — and how high taxes have to get before they have an impact — is a subject of much debate in economics, but it’s inarguable that they do matter.) What supply‐siders have done is start with that reasonable idea and extrapolate it to unreasonable lengths.
