• Home
  • About CF&P
    • Board of Directors
    • Staff
    • Contact Us
  • Blog
  • News
    • Press Releases
    • Updates
  • Publications
    • Prosperitas Studies
    • Testimony and Speeches
  • Opinion & Commentary
  • Videos
    • Economic Lessons Series
    • Economics 101 Educational Series
  • Donate

Navigate

  • Home
  • About CF&P
    • Board of Directors
    • Staff
    • Contact Us
  • Blog
  • News
    • Press Releases
    • Updates
  • Publications
    • Prosperitas Studies
    • Testimony and Speeches
  • Opinion & Commentary
  • Videos
    • Economic Lessons Series
    • Economics 101 Educational Series
  • Donate
The Prudent Case for the Laffer Curve, Part II

The Prudent Case for the Laffer Curve, Part II

Posted on January 9, 2024 by Dan Mitchell

The Laffer Curve is the common-sense notion that changes in tax rates lead to changes in taxable income.

But, as I explain in this clip from a TV program in Hawaii, that doesn’t mean tax cuts “pay for themselves.”

Before any readers accuse me of being an apologist for class warfare, I’m a strong advocate of the Laffer Curve.

And I’ve cited examples of tax cuts that have produced more revenue.

  • Lower personal income tax rates on rich people in the 1980s.
  • Lower corporate income tax rates in Ireland in the 1980s and 1990s.
  • Maybe even Trump’s corporate tax cut (though we need a few more years of evidence).

But most tax cuts are not self-financing. There will almost always be revenue feedback, of course, but the revenue loss from the lower rate generally will be larger than the revenue gain from higher taxable income.

However, that is not an argument against lowering taxes. As I stated in the discussion, it would be a win-win situation if we could convince politicians to lower tax rates and restrain government spending.

Heck, because of the starve-the-beast theory, I’d applaud a revenue-losing tax cut precisely because it would reduce the amount of loot available to politicians.

P.S. I mentioned that Hawaii has a spending cap. That’s the good news. The bad news is that the legislature routinely waives it. To build on an analogy I’ve used before, having a speed limit in a school zone is a good idea, but not if it’s set at 70 MPH. Or, in the case of Hawaii, a speed limit in a school zone is pointless if the cops announce they will never patrol that road.

———
Image credit: Gage Skidmore | CC BY-SA 2.0.


fiscal policy Laffer Curve Taxation
January 9, 2024
Dan Mitchell

Dan Mitchell

Dan Mitchell is co-founder of the Center for Freedom and Prosperity and Chairman of the Board. He is an expert in international tax competition and supply-side tax policy.

Find Us On Facebook

Follow Us On Twitter

Tweets by @CFandP
"I write to express support for the Center for Freedom and Prosperity's support of tax competition."
    
~ Milton Friedman, Nobel Laureate ~


 "By fighting against an international tax cartel and working to preserve financial privacy, the Center for Freedom and Prosperity is protecting taxpayers, both in America and around the world."
    
~ Rep. Dick Armey, Former Majority Leader, U.S. House of Reps. ~
  • Home
  • About CF&P and CF&P Foundation
  • Donate
  • News
  • Publications
  • Opinion and Commentary
  • Market Center Blog
  • Videos
© Copyright 2014, All Rights Reserved.