Does the Laffer curve exist?
We have no idea what the Laffer curve looks like, let alone where the peak is. In fact there is no compelling evidence that it even exists. It seems obvious that 100% taxation would induce people to stop working, and we do know that very high marginal tax rates due to benefit withdrawal do discourage the poor from working. But arguments that even a small increase in the top rate of tax would result in mass flight of talent, resulting in economic disaster, are unfounded.
The Abominable Laffer Curve
By: Frances Coppola
Simply a bad idea!
… the observation at the core of the Laffer Curve often gets distorted as supporting the idea that tax cuts pay for themselves. Like that should be the baseline assumption or something. Now it’s bad enough when politicians push this view. But it’s worse when trained economists do, and Laffer himself has at times seemed to give this errant view some measure of support.
Thinking about the Laffer Curve
By: James Pethokoukis – American Enterprise Institute
[The Laffer curve] was first drawn on a cocktail napkin by one of US President Ronald Reagan’s advisors in the 1970s. Since then, it has been routinely reproduced in economics textbooks. This article provides an historical account that shows a sharp contrast between the formal triviality of the curve and the complexity of its circulation through various communities of economists, policy advisors, propagandists, and journalists. In this paper, I show that the dispersion of the Laffer curve presents two peculiarities: first, unlike many other diagrams used in economics, popular instantiations of the Laffer curve preceded its “academization” in professional economics; second, in spite of numerous transformations in the process of circulation, the curve’s canonical presentation as a symmetrical, bullet-like diagram was reinforced over time. I attribute these peculiarities to the community dynamics that sustained and circulated the curve.
Legitimizing Napkin Drawing: The Curious Dispersion of Laffer Curves (1978-2008)
Authors: Yann Giraud
From: THEMA – Université de Cergy-Pontoise