Monday, November 28, 2011

The Laffer Curve for the Rich

Kevin Drum wrote Raw Data: The Laffer Curve for the Rich.

"Peter Diamond and Emmanuel Saez have tried to calculate the tax rate on the rich that would maximize revenue to the government."

"If you assume a broad base and no deductions, Diamond and Saez peg the revenue maximizing rate for top earners at 76 percent. That's for federal income tax only."

"Roughly speaking, though, this is a calculation of the peak of the famous Laffer Curve. (For top earners, anyway.) Above 76 percent, you really can generate higher revenues by lowering tax rates. Below that, higher rates generate higher revenue, just like you'd think."


Ken Flowers said...

Maximize revenue to the government? Is that on the theory that the more money the government gets, the better? If only we could de-richify those bastards, and give it to the government, then the government could take care of me.

Howard said...

Did you follow the link? It's an academic exercise, but it also disproves the standing Republican mantra that (always) lowering taxes will increase government revenue and magically balance the budget.

But I wonder, does the libertarian "the government shouldn't take care of us" also eliminate the "government is the spender of last resort" in a recession? I don't think it should.