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  #141  
Old 03-01-2018, 10:18 AM
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whell whell is offline
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Originally Posted by finnbow View Post
Actually, supply-side theory says what you say up to a point (i.e., the point of Art Laffer's maximum tax revenue). However, it says exactly the opposite on the other side of this peak. The fundamental weakness of Laffer and supply-side theory ([other than the ridiculous notion that tax rates are the only meaningful variable in predicting economic activity) is that neither the X or Y axis has values assigned to it and, to the extent it actually models real economic behavior (it can't and it doesn't), you have no idea where our economy is on the X-axis (will a tax cut increase or decrease revenue?).

Republicans always assume that we are permanently on one side of the peak, where tax decreases will always increase revenue. The real-life experiences of Reaganomics, Dubya's tax cuts, and the states of Kansas & Oklahoma reveal the fallacy of this one-independent variable model, not to mention the fact that we have no idea where our economy falls on the curve, even if this over-simplified and discredited model were valid. On the only side of the Laffer curve that the GOP ascribes to (right of center), my assessment of supply-side is absolutely true (i.e., decreases in taxes will increase revenue and obviate the need to decrease spending due to this increased revenue).

If you had a shred of economic education or knowledge, you'd understand that a model that tries to model the behavior of an $18.5 trillion economy based upon only one variable is ridiculous on its face. Your model predicts that Chad, Djibouti, the Congo and Belize have more vibrant and successful economies than the UK, the Netherlands, Germany and Denmark. How's does that work out for you?

Still showing a lack of understanding. You always know where you are on both the X and Y axis. In fact, the model inherently suggests that there is a point of diminishing returns when the theory is applied. It depends on what your objective is. If the objective is to maximize revenue, then you need to find the spot on the curve where revenue is maximized. This means that there is a tax rate that is too low to achieve revenue maximization - where decreasing taxes becomes counterproductive. It also means that there's a point where taxes are too high to achieve revenue maximization - where increasing taxes becomes counterproductive.

As stated, supply side doesn't look at the spending side of the equation. The focus is on increasing revenue, not in determining how that revenue is spent. The idea that supply side is blamed for not having enough money to spend - especially in an environment like Washington DC where there is no fiscal discipline and spending money is seen as a way to buy political power - is sophistry of the first order. Bitching the "real-life experiences of Reaganomics, Dubya's tax cuts, and the states of Kansas & Oklahoma reveal the fallacy of this one-independent variable model" is your way of capitalizing on that sophistry.

Bitching about the "one sided" nature of supply side is also BS. If that's true, then you'd also have to bitch about the Keynesian crowd believing that we must always spend, and the revenue side of the equation be damned. Pretty tough to find a Keynesian advocating for spending cuts in good economic times or bad economic times. They'll tell you that gov't spending in a recession/depression is stimulative. They'll also tell you that when the economy is doing well, we need to spend that "peace dividend", or invest in job training, infrastructure or other nebulous and dubious "priorities".

Bottom line is with any economic theory, there's a balance in application that needs to be observed. Our corporate tax rate was certainly in need to reduction due to the relatively high rates versus other countries.

Reduction of personal tax rates was also accompanied by changes to tax code that reduced deductions (i.e., interest deduct-ability of home equity loans, state taxes, etc.). Not exactly a 1:1, but not dramatic either (as some here have pointed out).

The short term spending bill bugs me, sure. But I don't think this administration is done yet reducing the size and cost of government. So, maybe this will turn out to be the more balanced approach. Time will tell.
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  #142  
Old 03-01-2018, 10:29 AM
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Originally Posted by whell View Post
Still showing a lack of understanding. You always know where you are on both the X and Y axis...
How can you know where you are on this graph if neither axis has values assigned? For example, can you tell me which exact point on the X axis (what tax rate) provides for maximum revenue? If you can't, you can't logically make an argument that we are at a point on the graph where tax cuts will increase or decrease revenue.

Furthermore, if you even attempt to respond to this, you're admitting that you believe that our economy's health is based solely upon one variable (tax rates) and that monetary policy is fundamentally irrelevant (as are rule of law, corporate governance, corruption, education, worker mobility, innovation ...) Have you ever studied advanced math, statistics or economics? It sure doesn't look like it. The more you try to demonstrate your knowledge of economics, the less it appears you actually understand.
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Last edited by finnbow; 03-01-2018 at 11:02 AM.
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  #143  
Old 03-01-2018, 11:30 AM
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Originally Posted by finnbow View Post
How can you know where you are on this graph if neither axis has values assigned? For example, can you tell me which exact point on the X axis (what tax rate) provides for maximum revenue? If you can't, you can't logically make an argument that we are at a point on the graph where tax cuts will increase or decrease revenue.

Furthermore, if you even attempt to respond to this, you're admitting that you believe that our economy's health is based solely upon one variable (tax rates) and that monetary policy is fundamentally irrelevant (as are rule of law, corporate governance, corruption, education, worker mobility, innovation ...) Have you ever studied advanced math, statistics or economics? It sure doesn't look like it. The more you try to demonstrate your knowledge of economics, the less it appears you actually understand.
I love your attempt to set up straw dogs. You're truly unmatched on this. I also notice you sidestepped most of the content of my post and focused on a single sentence where you thought you could play "gotcha". Sorry to disappoint.

Let me ask you a question to illustrate how stupid your question is. Look at the Y axis - Revenue. What numbers SHOULD appear there? I think we can agree that the bottom of the axis is zero. But since Laffer never subscribed to your version / explanation of the theory - in other words Laffer never assumed that there was a single variable at work - he never included a value. To know what the minimum and maximum values were, he'd also have to know how much economic activity / capital formation / employment / etc. was going to be produced in any given year. No way to know that. The best the gov't can do is forecast that.

However, is it even arguable that you'll get more capital formation and conversion as the tax rate on capital gains goes down? No. In fact, you guys always WORRY about the this because "the rich" will benefit from it. If there was no positive economic impact from the reduction of taxes on capital, you wouldn't care one way or another.

Now the Y axis. Is it even arguable that as taxes on earnings approach 100%, that revenue from taxes on earnings will go down? If you think that the answer is that revenue from taxes on labor is maximized as the tax approaches 100%, then you should be the last person to suggest that others have a knowledge deficit about economics.
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  #144  
Old 03-01-2018, 12:04 PM
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Straw man: a misrepresentation of an opponent's argument, designed to be easily seen as invalid.

Straw dog: a faulty proposal offered to a decision-maker, to influence them to choose another alternative.
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  #145  
Old 03-01-2018, 12:42 PM
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Is there a practical model for sustainable perpetual universal prosperity here, or anywhere?
No.
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  #146  
Old 03-01-2018, 01:13 PM
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finnbow finnbow is offline
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Originally Posted by whell View Post
I love your attempt to set up straw dogs. You're truly unmatched on this. I also notice you sidestepped most of the content of my post and focused on a single sentence where you thought you could play "gotcha". Sorry to disappoint.
You said you knew exactly where we were on the Laffer curve. Show me.

Quote:
However, is it even arguable that you'll get more capital formation and conversion as the tax rate on capital gains goes down?
Of course it's arguable. The economy is multi-faceted and doesn't depend on one thing like tax rates. The economy has done really well in times of relatively high taxes and really poorly in times of relatively low taxes (and vice versa). For example, if Trump's tax cuts result in significantly higher inflation and interest rates (as is feared) or if his threatened steel and aluminum tariffs cause a trade war, the economy will suffer.

The whole supply-side myth is simply pseudo economic science contrived to sell tax cuts for wealthy conservatives to the poorly-educated and easily manipulated. It has never worked in practice, but the myth seems to have stuck with people like you gullible enough to buy into it.
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Last edited by finnbow; 03-01-2018 at 01:49 PM.
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  #147  
Old 03-01-2018, 02:18 PM
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whell whell is offline
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Originally Posted by finnbow View Post
You said you knew exactly where we were on the Laffer curve. Show me.
No, I didn't say that, and I explained it. Go back and read again if you didn't understand.

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Originally Posted by finnbow View Post
Of course it's arguable. The economy is multi-faceted and doesn't depend on one thing like tax rates.
That wasn't the question. I'll ask it again, (and you'll probably avoid it again):

Is it likely that an economy will have more capital formation and conversion as the tax rate on capital gains goes down?

You also avoided the other question:

As the tax on income approaches 100%, does the revenue from that tax keep going up, or does it start to go down?
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  #148  
Old 03-01-2018, 02:56 PM
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finnbow finnbow is offline
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Originally Posted by whell View Post
No, I didn't say that, and I explained it. Go back and read again if you didn't understand.
Uh, yes you did - "You always know where you are on both the X and Y axis."

Quote:
Laffer never assumed that there was a single variable at work.
Sorry, but yes he did. A smooth parabola such as his describes a specific relationship of one variable to another (the dependent variable (revenue) and the independent variable (tax rate)) and no other variables. And that's exactly why it's completely worthless as an economic model, considering the number of variables that impact the nation's economy, not to mention the illegitimacy of the underlying model (he has/had no data points with which to establish the relationship between tax rates and revenue).

Quote:
Is it likely that an economy will have more capital formation and conversion as the tax rate on capital gains goes down?
Debatable. Most equity investors don't invest in equities strictly due to favorable capital gains treatment. They do so because in the long run, equities generally outperform bonds. In any event, the latest GOP tax plan didn't touch capital gains while it gave huge contraindicated income tax breaks to the wealthy.

Quote:
You also avoided the other question:

As the tax on income approaches 100%, does the revenue from that tax keep going up, or does it start to go down?
It does the same thing as it does when tax rates go to zero. It's a no-brainer that a 0% and a 100% tax rate will result in no revenue. There's never been any argument about that. It's every other point on the Laffer Curve that is suspect and Laffer's theory represents nothing other than a drunken doodle on a cocktail napkin that somehow became conservative economic dogma without a shred of evidence to support it (and plenty to refute it).

(T)his tidy arc of cause and consequence (of the Laffer curve) doesn’t exist in the real world. Sure, extremely high tax rates douse economic activity. But there’s no reason to assume the relationship between tax revenue and tax rates is perfectly U-shaped. And the equilibrium point at which a government collects the most revenue possible without dragging down the economy is impossible to know—and varies by country. There was no reason in 1974—or, for that matter, now—to think the US was on the curve’s “prohibitive” half (many economists put the inflection point for the highest marginal tax rate at around 70%). In fact, without detailed data, you can’t tell where on Laffer’s curve (or non-curve) you are at all.

https://qz.com/895785/laffer-curve-e...d-reaganomics/
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Last edited by finnbow; 03-01-2018 at 05:30 PM.
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  #149  
Old 03-01-2018, 06:09 PM
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whell whell is offline
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Originally Posted by finnbow View Post
Sorry, but yes he did. A smooth parabola such as his describes a specific relationship of one variable to another (the dependent variable (revenue) and the independent variable (tax rate)) and no other variables. And that's exactly why it's completely worthless as an economic model, considering the number of variables that impact the nation's economy, not to mention the illegitimacy of the underlying model (he has/had no data points with which to establish the relationship between tax rates and revenue).
You are so screwed up here. The Laffer curve that you refer to above isn't the entirety of supply side theory, but rather an illustration of a single aspect of it. You're talking about it like it represents the theory in its entirety. No wonder you're confused....or just being a demigog.
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  #150  
Old 03-01-2018, 06:26 PM
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finnbow finnbow is offline
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You are so screwed up here. The Laffer curve that you refer to above isn't the entirety of supply side theory, but rather an illustration of a single aspect of it. You're talking about it like it represents the theory in its entirety. No wonder you're confused....or just being a demigog.
Nope. Conservative supply-side theory's foundational document was a sketch on the back of a napkin by Art Laffer for Dick Cheney and Donald Rumsfeld. No fucking wonder it's such a shambolic piece of shit when you consider it was the drunken idea of three half-wits.

https://www.bloomberg.com/news/artic...side-economics

And it's "demagogue," like your dear Trumpenfuhrer.
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