Monday, November 07, 2011

Why tax rate cuts sometimes increase revenue - part I

Art Laffer in the late 1970s shook up the world of tax economics and policy with his observations - that decreasing a tax rate can result in more revenue. And, more importantly, that it does so by giving earners incentive to be more active and productive. Which causes growth and many benefits. But... that is cutting the marginal rate of taxing - the amount paid on the next dollar earned. Most tax changes don't do this - child credits, green-energy credits - and do not have the beneficial effect on revenue and growth.

Dan Mitchell at Cato Institute on the Laffer Curve

First Lesson

Part two will cite real-world examples of the Laffer Curve. Coming.

Daniel J Mitchell's own blog is excellent - International Liberty.

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