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Health Care vs. Wealth Care.
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Twilight Zone Economics.
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From Ashes, GOP Opportunities.
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Battle Between Entitlements & Pork.
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Let Economic Freedom Reign.
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Biggest Health Care Moment In Decades.
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Unions Antithetical to Liberty.
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Right To Work States Rock.
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Social Security Reform Thursday.
March 13, 2008
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Mar. 14, 2006
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Mainstream Melee: Wolfowitz.
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The Laffer Curve Lives!
Lowering taxes increases tax revenues.
You read that right. When the government LOWERS taxes, it generates MORE money.
So sayeth Arthur Laffer.
The SocialSecurityChoice.com blog explains the Laffer curve and how Bush's tax relief has actually increased revenues coming into the government.
"The answer is simple: above some optimum tax rate, every tax becomes counterproductive. When sketched as a graph on a cocktail napkin, this economic truth is known as 'the Laffer Curve'.
Larry Kudlow noted this phenomenon more than a month ago:
"Here’s one story you won’t find on tomorrow’s front pages: 'The U.S. Budget Deficit Is Shrinking Rapidly.' The headline would be accurate, but the mainstream media is much more interested in talking down this booming economy than telling it like it is. This week’s Treasury report on the nation’s finances for December shows a year-to-date fiscal 2005 deficit that is already $11 billion less than last year’s. In the first three months of the fiscal year that began last October, cash outlays by the federal government increased by 6.1 percent while tax collections grew by 10.5 percent. When more money comes in than goes out, the deficit shrinks.
William P. Kucewicz, in National Review, writes:
"By now, the effects of the Bush tax reforms should be obvious to all but the most obtuse observers. From the beginning of 2002 to mid-2003, private investment’s GDP share was flat at 15.3 percent to 15.5 percent. After the June 2003 tax cuts, though, the percentage rose steadily, reaching 17 percent in 2004. As a result, the growth rate of private domestic GDP (i.e., GDP less trade and government) has almost doubled, accelerating from 2.8 percent in the second quarter of 2003 to a year-on-year average of more than 5 percent since then.
The Laffer Curve Lives!
Posted by Will Franklin · 15 February 2005 03:46 PM
You were smart to make your own version of their chart -- their version is an 800k bitmap file that takes forever to load. (I emailed them about it through the Club For Growth site, and told them something you might also want to know, that if you change your image to a gif you can show the file as about 6k, even lower than the savings you've already realized with your jpg here). It just makes it a lot easier for your visitors.
Now a substantive remark -- as I wrote in my post about Louis Woodhill's analysis (at http://www.samueljohnson.com/blog/archives/0502b.html#16a ), if you start the line graph easier you can see how Clinton's 1993 tax increase led to more tax revenues; there's no reason to conclude that increasing taxes will lead to lower tax revenues. (Also, I think that some have estimated that the tax rate at which the Laffer Curve is at its peak may be in the 80% range, and we're nowhere near that point. For tax reductions to increase tax revenues, we have to be past that point on the Laffer Curve.)
Posted by: Frank at February 16, 2005 10:05 AM
An important typo in my previous comment: "if you start the line graph easier" should have read - -
"if you start the line graph earlier"
Posted by: Frank at February 16, 2005 10:16 AM
Thanks for your comments, Frank. I will work on the images so they are smaller and easier to read, although the one I have now is a .gif already.
The version on Club for Growth's blog was horrible. It was also in .bmp format, which is not all that useful anymore.
And good point on the 1993 tax hikes.
Posted by: Will Franklin at February 16, 2005 11:10 AM