Art Laffer explains the Laffer Curve

Art Laffer refering to his profile as the laffer curve really made me laff

The hard part is knowing where you are on the curve

Art also created the Laffer track so people know when to laugh during sitcoms.

A difficult concept, explained very simply. Well done. Here in the UK, for a time about 50 years ago, the tax rate on high-earning individuals was 99%. So all of those high-earners went overseas and the government earned zero. When the tax rate was dropped to a sensible level, those high-earners returned and tax revenue increased dramatically.

There is another point, it is unfixed as far as "percentage taxed" but it is fixed as far as "tax revenue collected". That point is the point where you don't collect 100% of their money, but you do collect enough that they cannot progress, they make JUST enough money to live and pay the bills... and NO MORE. Because they cannot progress, there is no incentive to work, they work for nothing, just working to work more tomorrow, there is no future and no growth, therefore, the economy dies. This is important because it means that you actually hit that "zero tax revenue" point well before reaching the 100% taxes point.

Largely the same as the price curve for any product or service, except taxes are by force.

Now, I would like to see him explain in a separate video, as to why does the peak of the Laffer curve shift? And is it, that he would still encourage its use then?

Many of you are looking at this all wrong. What you're failing to see is that lower tax rates generate more production and economic growth (GDP). This is due to the smaller overhead on business, their ability to grow and expand, produce more, purchase more, start businesses, and hire more workers. So, think of an economy with low taxes as a pie that is growing in size. This growth means that there are more businesses in business and more taxpayers paying taxes. So, to make it simple, would you rather have 15% of a pie the size of the empire state building, or 90% of a pie the size of a Volkswagen? The lower percentage, believe it or not, actually correlates with more revenue for the government. Would you rather have 18% of a gigantic economy worth trillions, or 91% of a small economy worth a few million? If your answer is that you want 91% of a gigantic economy worth trillions, you're missing the point. That economy would have never grown to that size with the 91% tax rate, and to make that the policy going forward, will only shrink it. Another way to look at it: You will receive more tax revenue in a robust economy by taxing hundreds of workers making 60k a small 10% tax -- than you will if you taxed a smaller economy that has only maybe 10 or 20 workers making 60k, at a 60% or 70% tax rate. Moral of this story: you will not have that robust economy with hundreds of workers making that 60k in a 60-70% tax environment, only because of that low 10% tax rate is it possible to even have that many workers making 60k, and the nice side effect is more revenue for the government in the end, REGARDLESS of the lower actual rate (%)

It's easy to find out where you are, on the curve. Just lower tax rates. If revenue goes up, then the old tax rate was too high!

What he didn't state clearly was that the graph shown was subjective, not objective. By which I mean the point at which revenues start to decrease is not 50%. This inflection point varies by time and place. In the American colonies in the 1770s it was in the single digits and only certain goods were taxed, but widespread disobedience (and armed revolt) made that little bit of taxation an inflection point. There have been documented cases of 10% and of 70% being inflection points. More progressive tax systems like what are used in the U.S., where the rich pay higher percentages than the poor, also complicate any attempt to discuss actual numbers. Interestingly because the rich are more able to move their money around and change where they live or work to avoid paying taxes the inflection point on the rich is lower than the inflection point on the poor. A massive tax hike on the poor is more likely to raise revenue than a hike on the rich as the poor are less able to avoid paying.

Laffer owes Peter Schiff money

Watching ferris bueller with the subtitles on brought me here!!

I never tought this sort of stuff could be interesting, but it definitly was!

All these years later, that one scene in Ferris Bueller's Day off makes so much more sense.

In recent times where have we seen tax rates over 90%? In the UK, it was when people receiving state benefits of one sort or another had their benefits reduced by the amount that they earned above a very low threshold. Inspectors were employed to make sure that the poor had no money coming in. That contrasted with the indulgence shown to the rich who didn't want to pay tax.

Great video.

This dude owes a penny to somebody

And that's why most civilised countries have income taxes near but below the middle. However, there are stealth taxes, like the uK's national insurance that is an income tax ontop of income tax but because its split from income tax people don't factor it into 'how much they are taxed' in a simplistic manner.

I think some Democrat politicians should watch this

Thank you