Jump to content
Objectivism Online Forum

the Laffer Curve?

Rate this topic


Recommended Posts

The Laffer Curve is the notion that if there are too many taxes, or not enough taxes, there will be no government revenue, and you must pick the tax rate that is "just right".

I highly doubt the government would not make any money if there were no taxes, which is what the Laffer Curve seems to suggest. But the idea of the Laffer Curve is that if there is too much taxation, there will be no revenue.

Is government revenue directly proportional to less taxation? Is government revenue proportional to more taxation?

Link to post
Share on other sites
Is government revenue directly proportional to less taxation? Is government revenue proportional to more taxation?

The basic idea behind the Laffer Curve is that if you have tax something at a rate of 0%, you will get no revenue, and if you tax something at a rate of 100% nobody will perform the taxed action and you will still get no revenue. This implies that as you vary the rate from 0% to 100%, the amount of revenue you get will start at 0, rise to some level and then decline to 0 again. And that implies that, under some circumstances, it is possible for a government to obtain more revenue by lowering the tax rate. The lowered tax rate enables more production, and your tax provides you with a smaller proportionate slice of a larger economic pie.

Conservatives relied heavily on this argument to defend Reagan's tax cutting program in the 1980's. While valid within its own context, it is not an argument Objectivists should adopt. The implicit premise is that the goal of tax policy should be to maximize government revenue, and this is just not true. The fundamental argument for tax cuts is moral: the wealth belongs to those who created it, and it is wrong to take it from them by force.

Link to post
Share on other sites

Laffer advocates a flat tax of 11%-12%, if Im not mistaken. What are your opinions on a flat tax, as opposed to the system in place today in the US? I understand and agree with the Objectivist stance on taxation, Im just looking for your thoughts as a comparison between a flat tax, and our governments current theft techniques.

j..

Link to post
Share on other sites
Laffer advocates a flat tax of 11%-12%, if Im not mistaken. What are your opinions on a flat tax, as opposed to the system in place today in the US? I understand and agree with the Objectivist stance on taxation, Im just looking for your thoughts as a comparison between a flat tax, and our governments current theft techniques.

j..

Taxation is theft, regardless of the rate. That is my opinion. Taking 10% of what I earn is no less immoral than taking 90%.

Link to post
Share on other sites
Laffer advocates a flat tax of 11%-12%, if Im not mistaken. What are your opinions on a flat tax, as opposed to the system in place today in the US? I understand and agree with the Objectivist stance on taxation, Im just looking for your thoughts as a comparison between a flat tax, and our governments current theft techniques.

j..

There's an argument that the producers and protectors of money and money-based contracts deserve compensation for the value they provide in facilitating efficient market transactions (as opposed to the non-monetary barter system). Imposing a transaction tax would seem a fair method of collecting for the value provided. But it would only be moral if the use of gov't-created money was voluntary. In such a system people could choose to use private bank currency to transact business without a tax, but they would be taking a risk that their transactions would not be protected by the gov't from fraud.

Link to post
Share on other sites
Taxation is theft, regardless of the rate. That is my opinion. Taking 10% of what I earn is no less immoral than taking 90%.

I understand, and agree. What should we do to advocate our beliefs? Having your opinion, and standing behind it is great, but it appears that no one else in this country gets it. Trying to convince people in todays political climate that taxation, as such, is theft and should be done away with is basically futile. Other than being pragmatic, and advocating a flat tax, as at least a step in the right direction, what other ideas can we stand behind as a real world solution to the state of the US? Curing a nation from philosophic bankruptcy seems impossible. Im just discouraged......

There's an argument that the producers and protectors of money and money-based contracts deserve compensation for the value they provide in facilitating efficient market transactions (as opposed to the non-monetary barter system). Imposing a transaction tax would seem a fair method of collecting for the value provided. But it would only be moral if the use of gov't-created money was voluntary. In such a system people could choose to use private bank currency to transact business without a tax, but they would be taking a risk that their transactions would not be protected by the gov't from fraud.

This is in line with what Rand lays out in "Government Financing in a Free Society", its a morally sound method for producing Govt. revenue. Will it ever be considered by any politician, ever? I just dont see how we can implement a major ideological overhaul on a nation that doesnt get it, and refuses to try. Its hard not to lose hope, and just go with the ignorant flow...... Im just discouraged today, Ill take a night off from watching the news or something.

j..

Link to post
Share on other sites
Laffer advocates a flat tax of 11%-12%, if Im not mistaken. What are your opinions on a flat tax, as opposed to the system in place today in the US? I understand and agree with the Objectivist stance on taxation, I'm just looking for your thoughts as a comparison between a flat tax, and our governments current theft techniques.

The ultimate goal is to reduce government spending to that required for its proper function, and to reduce taxation to zero while migrating to a voluntary financing system. As such, I am generally supportive of policy changes that take us in that direction. A flat tax is probably such a step, insofar as it makes it more difficult for the government to engage in illegitimate social engineering via the tax code.

I don't think this is the best area to focus current tax-related activism at this time, unfortunately. The Democrats seem to be planning to introduce a VAT in the near future, on top of all the other existing taxes, and that move must be stopped. We also need to get spending back under control, or the spiraling debt will simply crush us. So a simple fiscal policy activism focus would be: Cut Spending, No New Taxes.

Link to post
Share on other sites
  • 3 weeks later...

As much as I get that Laffer Curve should not be an argument we should adapt, I'm still curious about the merits of it. People keep on saying it was "discredited", but by whom? Conservatives in the Bush Administration? They said that in response to the deficit, not in response to tax cuts resulting in more revenue.

It's important to at least adapt something similar to it. After all, if we want to argue morality, but no practicality, how can we reject the overall dichotomy?

Link to post
Share on other sites
It's important to at least adapt something similar to it.

The Laffer curve fails when applied in the context of Objectivist government because it assumes that the product of government (protection of rights) is valueless. This assumption is masked in the data point 0% tax rate = 0 revenue (i.e. if we don't point a gun at people, they wont pay for rights protection). This is false.

Is anyone concerned about corn farmers having zero revenue if we stop taxing people to give them subsidies? No. Corn has value - corn farmes will have some revenue even with no corecion (i.e. 0% tax rate financing them).

A free government is financed willingly by the people who realize the double value it provides 1. retaliating against criminals (domestic or international) and 2. preventing a taxing government from taking over.

Link to post
Share on other sites
  • 3 weeks later...
While valid within its own context, it is not an argument Objectivists should adopt.

It absolutely IS an "argument" that Objectivists should adopt, because the underlying principle of the argument is important to understand in an Objectivist society just as it is this one.

At a certain level taxation is counter-productive in terms of gathering revenue, and it's very possible for a proper government to run up against this issue (for instance, if the country is in a very expensive war or has an extreme crime problem).

Is anyone concerned about corn farmers having zero revenue if we stop taxing people to give them subsidies? No. Corn has value - corn farmes will have some revenue even with no corecion (i.e. 0% tax rate financing them).

This is so nonsensical I can't even address it as if it's an argument.

Edited by Minarchist
Link to post
Share on other sites
  • 3 months later...

This is so nonsensical I can't even address it as if it's an argument.

Out of three paragraphs, two of which are arguments or statements of principle, you singled out exactly the one that is not to engage as if it were intended as one. This shows that you have a ways to go still in learning to argue in principle.

Hint: the quote you selected is an example, not an argument.

Edited by mrocktor
Link to post
Share on other sites

Taxation is theft, regardless of the rate. That is my opinion. Taking 10% of what I earn is no less immoral than taking 90%.

This is a clear example of taking Objectivist moral principles as floating abstractions unconnected to their impacts on man's life. Of course there are degrees of immorality, and taking 10% of my income is much less immoral than taking 90% of my income. Both actions are immoral, certainly, but it is clearly far more inimical to my survival to live under a system which taxes away 90% of my wealth than the 10% alternative.

Political systems should be judged on how well tailored they are to the requirements of man's life. Both of those systems of taxation are founded on an anti-life principle: the principle that it is proper to initiate force against citizens in order to support the government. However, the application of that principle varies greatly, and the result is that life as a human being under one system is nearly impossible, while life under the other is relatively unhindered. Never forget that proper principles are abstractions from reality and must be applied to concretes with care and attention to the facts that gave rise to the initial formulation of the principle.

Link to post
Share on other sites

People keep on saying it was "discredited", but by whom? Conservatives in the Bush Administration? They said that in response to the deficit, not in response to tax cuts resulting in more revenue.

The problem that conservatives generally have with using the Laffer curve argument is that it's extremely hard to tell just where on the Laffer curve we are. Are we at a point where we can increase revenue by lowering taxation? Most times we can't really tell, and if not, the argument doesn't work.

It's important to at least adapt something similar to it. After all, if we want to argue morality, but no practicality, how can we reject the overall dichotomy?

There is no dichotomy. Arguing for tax reduction on the basis of the Laffer curve concedes to your opponent some vital moral underpinnings which he or she should not have. It is therefore an impractical strategy for the long run, because the faulty moral premises underlying the debate have gone unchallenged. The most effective strategy to take against government taxation, even (or especially) in the current cultural context, is to attack the moral principles underlying the situation. They are the root of the problem.

It is certainly both practical and moral to work for tax reductions piece by piece, but it is never practical nor moral to concede the legitimacy of taxation while doing so.

Link to post
Share on other sites

Laffer advocates a flat tax of 11%-12%, if Im not mistaken. What are your opinions on a flat tax, as opposed to the system in place today in the US? I understand and agree with the Objectivist stance on taxation, Im just looking for your thoughts as a comparison between a flat tax, and our governments current theft techniques.

Taxation is theft, regardless of the rate. That is my opinion. Taking 10% of what I earn is no less immoral than taking 90%.

This was exactly the type of answer I was trying to avoid by framing the question the way I did.

This is a clear example of taking Objectivist moral principles as floating abstractions unconnected to their impacts on man's life. Of course there are degrees of immorality, and taking 10% of my income is much less immoral than taking 90% of my income. Both actions are immoral, certainly, but it is clearly far more inimical to my survival to live under a system which taxes away 90% of my wealth than the 10% alternative.

Agreed.

j..

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    No registered users viewing this page.

×
×
  • Create New...