Does the Laffer Curve Make Any Sense? 

Even in this situation it might be wrong. Depending on the impact those taxes had in lowering numbers of smokers. A big reason for less smokers today is education and public opinion and obviously smoking is mostly forbidden in public spaces. But your analogy is a bit broken anyway because the right wing talk mostly of other taxes like income tax, or coporate taxes. So arguing with tabacco tax is confusing the issue. The argument of the right is that more money in the hands of rich people and corporations will lead to more investment. They are not arguing that lower prices necessarily mean more revenue. The difference this makes is very obvious if you consider that you will buy a lot of goods just a certain number of times, cause you need it. For instance food and water. Lowering food or water prices might enable you to buy other goods but will not make you buy more food and water than you needed in the first place. But your obviously right on the point that taxes are there for a reason. If we don't consider that reason every argument on taxes is ridiculous. For instance in a lot of countries theres a gasoline tax for building roads, if we lower that tax and build less roads less people can drive so probably less gasoline is bought. Taxes are a very weird issue and sadly it is taken hostage by the right wingers, together with debt this gives a very toxic cocktail.

mijubo tobacco taxes can be 90% of the shelf price.

The Laffer Curve was literally thought up in a bar one night in 1974 and drawn on a napkin. This is a completely true story. americanhistory.si.edu/collections/search/object/nmah_1439217

I think mpc for addicted people is quite interesting would like to see some points on that. Although I suspect you just wanted to say that criticism on the Laffer curve is stupid considering single products / single taxes.

I know I smoke. And cause I'm addicted you would have to raise taxes a lot, to make me quit I guess. Though If you lower it, I would hardly be able to smoke more. I also don't think that a lot non-smokers would start if it would be cheaper

What do you mean over?

Sure! My buddy only wants to work 20 hours per week. Why? Because his ex wife can access his earnings after a certain infection point. So why work full time or overtime. He is not a slave. So trump cut taxes and revenue increased. The incentive to keep more of your take home pay stimulates GDP growth.

david is incapable of giving into the common sense conservatives on much of anything

Trickle down economics is not a real economic theory.

>Lower tax rate creates economic growth Explain? We've seen the wealthy do nothing but find ways to keep their wealth and make more on pump and dump schemes and crypto BS

The ultimate goal SHOULD not be to maximize government revenue; but unfortunately in the minds of most leftists, that IS the ultimate goal. (And because they don't understand the Laffer Curve, they overtax and fail at that goal.) There, fixed that for ya.

vinm300 Sure, and when Somalia raised taxes from 0%, tax revenues increase dramatically. So we know revenue is maximized at a rate between 0% and 100%.

Dom, I just threw that fact into the mix and I'm going to do it again. History :- During the Industrial Revolution (1750) Britain and Amsterdam banks were issuing lots of loans and stimulating active economic activity. In Paris they stopped taking deposits because "The vaults are full". Money needs velocity in the economy and France didn't have it.

Ikenna Ijere Kanu He's presenting to his base... 😂😂😂🤣😝

Ikenna Ijere Kanu Right! Good point. Don't look at the man behind the curtain. Intellectual sleight of hand. L. Kay Wilson

You still end up with more money. Your paycheck is always taxed as if that is what you will make every paycheck for a whole year. If you work overtime one paycheck you get taxed more but you still see more in your check. Once you file your taxes you’ll get more back.

Don't make me laff.

Mitch Vermeulen: Wow! How'd you think of that clever play on the name? It never would have occurred to me. Genius...

godfatherNYC or teaching to ppl who wanna learn about politics... I am trying to teach my little sister a bit about it so now I know what to look up an where to start

Just don't do what our modern day republicans (and the neoliberal dems.. there's no winning today in the US...) do and simplify it down to the point where it has no real world applicability any more... Society is complicated. There ARE NO SHORTCUTS, despite what our sad farce of politicians would say...

Stole the comment right off my fingertips. They start with an easy concept and teach their adherents to distrust anything complex, it's a win-win where we all lose.

Yeah - and the left is the one typically simplifying. Nothing is more compelling than to think someone else should pay for what you should have and someone else is responsible for your issues. David Pakman needs to study Thomas Sowell who has done the research and isn't challenged on the left, just simply ignored because his conclusions are contrary to what leftists want to see. The Laffer curve exists and is true, but it's an ideal which is practically unknowable. However that doesn't mean it's garbage and should be ignored.

Right because abortion is something other than killing babies...🙄

yep, do consider that Republican conservatives do not believe in scientific facts either. They basically 'make things up' as they go along.

Jane Lin That is lie! Republicans don’t believe the Earth is 6,000 years old. I would know. I am one of them and talk to them all the time. By the way, you think there are over 60 genders. See how that works?

Typical lies

Jeffrey Miner Dave addressed your concern is stating that Laffer curve is essentially meaningless because tax rates per bracket are more important than the average tax rate. If anyone is lacking a nuanced, balanced approach, it's the the right; they moan and piss about tax rates which are at historic lows and the deficit, as though lowering taxes won't increase the deficit.

Saying those programs are divorced from the economy is nonsense, those programs drive economic growth.

Yeah, see paragraph two. They drive economic growth the same way a tick stimulates blood flow.

@mrbadguysan But they aren't at "historic lows" when you consider all taxation as a bundle, they've just found new and exciting ways to tax us, so they can say individual taxes have never been so low. In reality, the average individual has never been so heavily taxed in the history of ever.

Jeffrey Miner Productivity gains equal a tick sucking from the economy? Never learned that in Economics 101.

Tax revenue fell from 17.7% to 7 8% under Reagan and 19.5% to 15.1 under Bush. Check your facts, kid.

retak lmao Argentina in general is doing poorly. It’s like it’s being run by a bunch of Davids. Hope Argentina gets better and turns to the right side more.

Farmers could have invested in better machinery themselves if they weren't taxed so high in the first place. Why have a government take that money, waste a big portion on bureaucracy, and then return some later? Skip the middleman, lower taxes and watch people invest. Government officials are people, just like investors. Their judgement and motives and capabilities are not better simply because they work in the public sector. Good point though. Temporary hardship can lead to a boom in prosperity later.

Literal soyboy bringing up tariffs in relation to this issue. I'm sure even Pakman would agree that tariffs need to be held to a far different standard of analysis when compared to other forms of taxation.

Either way, when you have an economy fueled by legumes you know you are pretty much screwed

retak David is talking about the US not Argentina.

You must have fell asleep in Economics class, don't worry we can wait for you to look up how government spending affects the economy. And while yes, syper high taxes could hurt the economy, to what are you comparing it to? Now? The 80s? 90s? Businesses? Individuals? Higher taxes as compared to what and when? You need to quantify and qualify your statement before you counter someone elses.

Shelby Herring , are you kidding me? Hayek and Friedman BOTH got Nobel peace prizes on separate occasions showing that the more taxes and the bigger government gets has a proportionally negative effect on the economy. The main reason is, that anything that government spends on has the cost of government attached to it. It’s been proven. Look, a person working for money provides something of value to the economy, AND then spends or invest that money. Both are positives FOR the economy. An tax you add to that situation, is bad for the economy. Like this; A person makes a salary. He gets 100%. $100,000. He gets taxed 1%, $1000. The person who earned the money can not spend that money. This person created $100,000 of value to tase for this $100,000. The IRS takes that $1000, they created nothing of value for this $1000. Then politicians get paid. The $1000 is sent to a social program. The social programs and the politicians create nothing of value in return for the $1000. Then after government costs it’s redistributed to someone say $800. In turn, the person created nothing of worth to replace that $1000. So yes, they “spend the money”, but replace it with nothing of any value. In business, this is called a non-revenue generating entity. It’s a simple concept. It’s you and a roommate. If you both have jobs. You get more value out of you money and so does he. You can buy more things and save more money. Put more money into your retirement fund. If your roommate doesn’t have a job, and you buy the food, pay for the house, pay for the utility’s and give him $50 a week. You BOTH have a LOT less money. You both can’t save money. You BOTH can’t have nice things because Only ONE person is being productive. IT’S the same thing!!!!

@@mrpedalsworth First off, I will agree to your point that greater taxation and bigger government can have a negative impact on the economy. Secondly, I will admit Hayek and Friedman did win Nobel Prizes on the subject of monetary policy and the potential negative effects of government becoming too great and stifling the economy through over regulation. Thirdly, I wil agree any government spending has the cost of government attached to it, that's kind of the point. Now, let me address my problem with your thought process here: 1.) Your use of the word "value" confuses me. Do you mean purely monetary value? Emotional value? There are multiple kinds of value. And government spending, even on social programs, does produce value: public works such as schools and roads, Medicare/Medicaid, educational grants and scholarships for college, pensions and benefits for military and government civilians, and unemployment benefits, that are more than just a UI paycheck every week, for those looking for work. I am sorry, but all of those are something of value to those people who need it. 2.) My problem with your original statement was the blanket expression "bigger taxes equals worse economy" which is only true some of the time, not all the time, which is why, aside from being a political tool to garner support for Reagan, the Laffer Curve was made. It was to generally illustrate the idea that too much taxation can hurt the economy by deterring people from wanting to pay taxes to too little cannot sustain the government to function, there needs to be some middle ground. Where it is , we don't know, but it needs to be somewhere in the middle. 3.) Hayek and Friedman were advocates for open markets, believing that industries would regulate themselves and that too much government regulation would essentially turn a country into a totalitarian regime. Now, they weren't wrong, but they definitely weren't 100% right either, as their fears of overreaching government could be just as easily applied to businesses, after all, both are run by people, particularly selfish people, not self-interested people, selfish people. Particularly in the form of monopolies, company towns that abused their workers, and businesses potentially being more powerful than the government themselves with more sway over politics to strangle competitors in the market. I can understand where you are coming from, though, deadweight loss from tax revenue and big government can be scary things, but my whole point originally was your statement needed added context for it to make sense, and while I see your meaning with the roommate analogy, you need to understand that tax collection and expenditures are not that simple. This is why we have a progressive tax system, and why a flat tax would be harder on those at the bottom of the socioeconomic totem pole. These social programs are not without merit or value, as you argue, they can enrich and better the lives of others, so they can eventually take part in the health and growth of an economy. This is not a simple issue. Yes, a totalitarian government is bad, but so is an anarchic or oligarchic market system, because people will be people, in all shades and manners.

Shelby Herring, any time you add a third party to a transaction the economy is worse off. Any time you add regulations the economy is worse off. Even if you agree we need the regulation, it adds cost, I.E. inflation. But we are not just talking on single added cost. You are adding layers of cost. State and federal costs on income tax, sales tax, fuel tax, property taxes, yearly vehicle taxes, licensing taxes. And it’s all slows down the economy.

Been a vegan _long,_ Bill? 84% of vegans and vegetarians quit within a few years.

Patrick is straight thin but gay fat.

Yes you are right, you've got to look at it structurally, not purely quantitatively.

You make a very good argument not just about the way the money is spent but also about where the taxes are levied and how, (ie parts of economy, participants, industries, geographically, types of taxes, income vs all the others, excise, land and resource royalties) and whether or not it is a sliding scale as Pakman said or flat. It's silly to just say tax without looking at the structural issues.

not necessarily regulation was quite low in the 40's and fifties while the tax rate was falling and the middle class was well of but, the percent of wealth the top one percent has cycles based on how likely a revolution is

In 1944 the tax rate was 94% and in the 50s, 60s, and 70s the tax rate never dropped below 75%. in 1981 it went to 50%. The boom bust cycles started with Reagan and his voodoo economics. Which even economists, if they were honest, was the beginning of the boom bust cycles.

You might remember that we had a financial crisis and one the slowest recoveries in us history. So if the economies bad and its not getting better do you think people will get paid more?

His answer fell apart when he says that higher taxes will help the economy. The fell of the likes of Milton Friedman and Thomas Sowell led to the uprising of fake intellectuals. Hey, dummy, the rich are not the ones who save their money, where do you think bank gets money to lend other people? Where does the hedge funds get their money from? You? Abra kadabra? It's kind of hypocritical to say that the rich is getting richer, yet says that the rich saves all their money. If they just save, how do they get richer fast? Laffer curve is never used in general tax rate, dummy, it's used within the brackets of taxes, that's why a reduction in the tax of the 1% is always bigger than tax reduction of the middle class, because, dummy, the tax rate of the 1% is way too high on the curve so that the rate is not optimal. Whether you think what is the optimal rate depends on research, Empirical evidence always show that lower tax increase the economy as well as the tax revenue, but because the economy increases faster then the GDP ratio of tax revenue goes down. But 100 billions as 15% of something is still bigger than 90 billions as 20% of something. The dumbest thing is thinking that taxing yourself can bring more wealth, where did you learn math? It's never used on the left, because the theory will go against the result of the left. You raise taxes, it will decrease tax revenue, by whatever means, people hating you and find ways to avoid the stealing you're committing by finding loopholes, or people not bothering to work and fire their employees, which results in less tax collected in the bottom half. Taxation doesn't create wealth, it's just necessary stealing. But 10% of the top paying 70% of the tax? How is this not stealing? Even the payroll tax, which is supposed to pay for the the social programs, are a trap, last year they collected 1.2 trillion to pay for a 1.8 trillion program. The left is bad at math, really bad. Oh and abortion is killing a baby by the way. Go into an abortion clinic, tell me what does the corpses looks like? Bunch of cells or human life. A head, 2 arm, 2 legs, a torso, it's all there.

Lowering taxes don't help the poor or the middle class? For first thing, the poor doesn't pay any taxes, their payroll tax is not enough to cover for their social programs by the way. So the only way of helping the poor is to? Generate jobs, dummy, and who generate jobs? You? Or the people with enough money and competency to manage it? Your welfare trap is the thing that never helped the poor or the middle class.

Farty McGee His degrees are in these fields. So this is his actual expertise. And I THINK he's my little sisters age cause I remember looking that up cause I thought he looked awful young which would make him around 32-34. but yeah. there's definitely a communication issue going on somewhere with people.

They're all too young to understand Becky....Anyone?....Anyone?......

David's argument is flawed. Just use the Laffer Curve to find the optimal rate for each bracket, like how businesses find the optimal price point for each market. Frankly, I don't think he understands what he's saying.

It would only double the budget if you keep charging the current prices of the private system. The point of universal health care is that everything is more centralized, there's less unnecessary bureaucracy and intermediaries in the system and the hospital's are not run solely for maximazing profit at all costs so it should become much cheaper for the government. And you don't need to eradicate the private system, for example if your employer pays for your health insurance you can still go to a private hospital and it probably would have shorter waiting times than a public one. Do you think the marginal cost of operating an ambulance for a 20 min ride to and from the hospital is over 1000 dollars? Of course not, they charge that in the US because they want to bleed you dry.

@@joaogoncalves1203 The healthcare industry spends $400M/year lobbying the government. If lawmakers legislate universal health care (UNC) that actually lowers the total spent on healthcare, the money they receive will shrink as well. So that's unlikely to happen. And even if UNC does get created, there'll be savings only if the government officials running it manage to keep waste and corruption to a minimum... a pipe dream given what we witness in other large-scale government programs such as defense and welfare. You can't count on the same people who are part of the problem to be the solution.

@@joaogoncalves1203 Dude, even if you're right, it's not possible to even come up with enough to balance our existing federal budget. We could literally not increase spending by a single penny, and raise tax rates significantly, and it doesn't get us there. Go reread my comment and do the math. The idea that we can collect enough revenue to continue these big government federal policies is objectively false.

@@blaynecarver2236 then how come is possible to do it for the defense budget? Mind you that over 200 billion of last years budget given to contractors was unaccounted for 🥴 the only thing lacking is political will because there's too much lobbying involved

Neither of the examples you gave make sense, because they are both wrong. Anyway I don't know how people can argue that the laffer curve is somehow false.

GoldyLuck greeeeeedddd. Duh.

Someone 5150 this man. He's clearly a danger to himself and others.

DerrenBrown100 because that's like getting dating tips from Ted Bundy.

mrbadguysan Yikes!

What do you mean it doesn't make sense? It makes perfect sense.

Uno G Venezuela used to have the northern Europe system and now look at it, in debt with a hyper inflated currency. All these Scandinavian countries will eventually wind up there it's only a matter of time.

I live in Sweden and I can tell that our welfare system is breaking down as we speak. People dying of cancer waiting for healthcare, an increased rate of violence since our police force is weakened and our schools has some of the lowest results according to PISA in Europe. So no, a high taxation doesn't necessarily lead to a better welfare system.

The actual laffer curve itself is inarguably accurate

@@OHYS citation needed.

I think people don't like the conclusions people draw from the laffer curve, but don't actually disagree with the laffer curve. It asserts that an extremely high tax rate on something (say 100% of all income) will produce no revenue, as will an extremely low tax rate (say 0%) and somewhere between the two, there is a rate which produces the highest revenue. That is all it says. It does not say that lowering a tax rate on something will always produce higher revenue from that tax. It also does not say anything about where the optimal tax rate on a given thing is.

@@OHYS that’s not a citation but whatever. I understand what the laffer curve is, the concept has never been sufficiently demonstrated. It is unsupported by the consensus of the data and research.

@@benwhitnell It doesn't need to be demonstrated. If tax rates were 100%, would you work? No, you wouldn't work, so the government would make no money from you. If tax rates were 0% of your salary, the government would make no money from you either. It does not require a test to prove that.