The Laffer Curve: Don’t Make me Laff!

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JustOnePage; summaries debunking the big lies of propogandists. V0422022.2

Arthur Laffer: popularized his Laffer Curve which purports to prove that tax cuts can pay for themselves by stimulating economic activity. He did this in the 70’s by drawing a graph on a napkin … not through following scholarly approaches followed by other economists. It was simply a napkin theory that was used by President Regan to lower taxes stimulating the economy (it worked! But also note that most deregulation was started under Carter) resulting in a stronger economy but with a very large debt increase for that time. The increase in revenue never came until ½ of it was recovered by closing loopholes, and eventually, H.W. Bush resorted to raising taxes. A 2012 Survey of 40 prominent economists failed to find a single one in agreement with Lafferism. Source: OKPolicy.org July 24th, 2012

No Evidence that it Works: There has never been a conclusive study that demonstrates a connection between lowered tax rates on the wealthy and GDP growth or increased tax receipts. During the 1940s and the 1970s, the top marginal tax rate ranged between 70 and 94 percent. In this same period, we experienced the largest GDP growth our country has ever seen, and we were able to invest in the future of our children, economy and environment. Source: CT Mirror, “Why the Laffer Curve is Garbage”, January 18,2018

Kansas Experiment Failed: Laffer was an economic adviser to Kansas Governor Sam Brownback, who in 2012 zeroed out state tax liability for approximately 330,000 of the top wage earners in the state, called the Kansas experiment, contending it would be a "shot of adrenaline into the heart of the Kansas economy." Kansas, which had budget surpluses in prior years, now suddenly experienced a budget deficit of about $200 million in 2012. Drastic cuts to state funding for education and infrastructure were implemented in the following years to close budget deficits and the Kansas economy underperformed relative to neighboring states. A supermajority of lawmakers in the Kansas legislature, both Democrats and Republicans, repealed the tax cut in June 2017, overriding Brownback's veto. Source "The Death of Kansas's Conservative Experiment". The Atlantic, June 7, 2017.

Taxes Encourage Reinvestment: When businesses have super high profits and encounter super high taxes, there are two (good) alternate places where this money could go: back into the business to improve or expand or into the hands of employees through benefits, training, or wages. Shareholders benefit either way, through increased capital reserve or infrastructure investment or happier, better-paid labor. Also, they can expand by buying other companies. Huge increases for executive salaries are often a (bad) alternative that does not improve the business; it just attracts executive job hoppers who are more apt to have no intimacy with the business at hand. That is one very important purpose of a strong progressive tax structure – it incentivizes those on the top to take less profit away from their business and invest in their business and employees. Another bad use of profits is to plow them into speculative securities that have nothing to do with the main business … or move cash offshore … or repurchasing stock to take it off the market only to increase the stock price. It only protects the owner on the upside but ruins the business with lost opportunities if those investments tank or just sit in accounts as cash doing nothing. In the “Trickle Down” fake theory, the money selectively leaves the cloud of the rich to rain only on certain small businesses. Better that businesses invest in their selves, their future, and their employees. Source: NYTimes, “The Dangerous Folly of Lafferism” June 25, 2019

What to Tell Joe: When “Joe the Plumber” asked Candidate Obama why he should pay a higher tax if going to the next tax bracket, Obama should have told him that he could avoid the higher tax bracket by spending more on his successful business (at that time, a down market, but plumbers in high demand) helping it expand by hiring one more plumber (decreasing the high unemployment at that time). Higher taxes for those in booming industries encourage re-investment in those industries to meet demand, rather than the owner buying another speed boat, buying back stock (only increasing share value, but not company value), paying executives crazy high salaries and bonuses, or investing in high risk instruments that have no direct relation to the business. Editor –smm 4/22/2022

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