HAT Manifesto Part 1/3 - Rubric Cube - 241201 revision

 

The Laffer Curve – Lower Tax Rates Now Mean Higher Tax Revenues Later

First, watch this short video: https://www.youtube.com/watch?v=FqLjyA0hL1s

Mostly summarized from the Mankiw book:

At a meeting in 1974 economist Arthur Laffer drew a figure to show how tax rates affect tax revenue, looking like Figure 1

He said the United States was on the downward-sloping right side of the curve, point A.

He argued tax rates were so high reducing them would raise tax revenue.

The Laffer curve theory of too-high taxes was resulting in low tax revenues was accepted by Ronald Reagan.

The views of Laffer and Reagan became known as supply-side economics.

Supply-side economists contend the Reagan tax cuts and economy boom of the 1980s proved the Laffer Curve.

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Per Figure 1 the goal of Democrat politicians is to be at point C.

They want to set tax rates where current tax revenues are maximized.

Employees and employers keep less money to spend and invest and government has more money to spend.

Per Figure 2 the Laffer curve position slowly moves upward over time as the economy slowly grows.

In this 50% tax rate example over time tax revenues increase from $7.75 to $8.50.

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Per Figure 1 the goal of Republican politicians is to be at point B.

They want lower tax rates with less than maximum current tax revenue.

Employees and employers keep more money to spend and invest and government has less money to spend.

Per Figure 3 the Laffer curve position rapidly moves upward over the same time period as the economy grows.

In this 30% tax rate example over time tax revenues increase from $7.75 to $9.25.

Models of results over time of raising or lower taxes shown in Tables 1 and 2.

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Many people believe in economic degrowth philosophy, which holds a smaller economy is better than a bigger economy.

They want to be at high taxes point A or even higher taxes point D on Figure 1.

Economic degrowth philosophy

ChatGPT:

Economic degrowth is a philosophical and socio-economic concept that argues for the intentional downsizing of economies to achieve sustainable development and address environmental challenges.

This philosophy critiques the conventional growth paradigm, which equates economic growth with progress and well-being, and posits infinite growth is unsustainable on a finite planet.

Key principles of economic degrowth philosophy

Sustainability:

Emphasizes the need to reduce ecological footprints and live within the Earth's carrying capacity.

This involves minimizing resource consumption, reducing waste, and promoting renewable energy sources.

Equity and social justice:

Advocates for a more equitable distribution of wealth and resources.

This includes addressing inequalities and ensuring all individuals have access to basic needs and a good quality of life.

Well-being over consumption:

Shifts focus from material wealth and consumerism to well-being and quality of life.

This includes promoting community, health, education, and meaningful work over the accumulation of goods.

Environmental protection:

Economic growth often leads to environmental degradation.

Degrowth advocates argue reducing economic activity can decrease pollution, conserve resources, and mitigate climate change.

Finite resources:

The planet has limited resources, and continuous economic growth is not feasible in the long run.

Degrowth promotes a steady-state economy that operates within these limits.

Quality of life:

High levels of consumption do not necessarily lead to greater happiness or well-being.

Degrowth suggests a simpler lifestyle focused on relationships, community, and health can be more fulfilling.

Reducing inequality:

Economic growth can exacerbate social inequalities.

Degrowth emphasizes redistributing wealth and ensuring everyone's basic needs are met.

(end ChatGPT)

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Arguments for rapid economic growth include it results in faster:

-movement of people out of poverty into prosperity, everyone becomes unequally wealthy and free of government-dependency

-development of medical sciences with resulting improved quality of life and longer life

-development of efficient use of and recycling of resources technologies

-development of electric energy production technologies

-development of environment improving technologies