Sunday, November 6, 2011

The Laffer Curve and the Relationship between Tax Rates, Taxable Income, and Tax Revenue

The Laffer Curve: tax increases general discourage incentive to make more money, which means the higher the tax rate, the lower the incentive to make money, which means the lower the incentive to make money, the lower taxable income people make, which then in turn means the lower the taxable income, the lower the tax revenue. So lower tax rates do indeed bring in more revenue for governments. The answer to our deficit and economic problems right now is, from purely an economic stand point, not raising taxes on the rich and wealthy, but instead, lowering tax rates for all, as well as making those tax rates flatter for all, if not having a completely flat tax rate for all in whatever form of taxation it may be. Keep in mind, all this is purely from an economic standpoint and does not include my opinions on the injustice and inequality of progressive and selective taxation, as well as double taxation.

Take a look at this video to better understand this phenomenon better:

Dan Mitchell also re-explains this phenomenon on his blog International Liberty and provides additional evidence of such:

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