Tuesday, April 13, 2010

The Laffer Curve: Past, Present, and Future

The Laffer Curve itself does not say whether a tax cut will raise or lower revenues. Revenue responses to a tax rate change will depend upon the tax system in place, the time period being considered, the ease of movement into underground activities, the level of tax rates already in place, the prevalence of legal and accounting-driven tax loopholes, and the proclivities of the productive factors. If the existing tax rate is too high--in the "prohibitive range" shown above--then a tax-rate cut would result in increased tax revenues. The economic effect of the tax cut would outweigh the arithmetic effect of the tax cut.

Source: http://www.heritage.org/Research/Reports/2004/06/The-Laffer-Curve-Past-Present-and-Future

As discussed on Glenn Beck's "The Plan".

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