What Reagan Actually Said

Reagan would roll over in his grave if he knew he was called

"That wiled eyed, socialist, tax hiking class warrior"

:type::type::type:

 

an analysis of goofy Reaganomics

FROM http://en.wikipedia.org/wiki/Laffer_curve

Quantification and empirical data

[edit]Research on revenue maximising tax rate
Economist Paul Pecorino presented a model in 1995 that predicted the peak of the Laffer curve occurred at tax rates around 65%.[12] A 1996 study by Y. Hsing of the United States economy between 1959 and 1991 placed the revenue-maximizing tax rate (the point at which another marginal tax rate increase would decrease tax revenue) between 32.67% and 35.21%.[13] A 1981 paper published in the Journal of Political Economy presented a model integrating empirical data that indicated that the point of maximum tax revenue in Sweden in the 1970s would have been 70%.[14] A recent paper by Trabandt and Uhlig of the NBER presented a model that predicted that the US and most European economies are on the left of the Laffer curve (in other words, that raising taxes would raise further revenue).[2] The New Palgrave Dictionary of Economics reports that for academic studies, the mid-range for the revenue maximizing rate is around 70%.[3]


A study by Teather and Young of the conservative Adam Smith Institute using evidence from the Republic of Ireland has suggested that the optimal rate for capital gains tax, as opposed to income tax, may be around 20%, but this is at least partly due to savvy taxpayers holding onto assets in anticipation of tax rates being lowered in the future.[15] A 2007 study by the conservative think tank, the American Enterprise Institute, says that the revenue maximizing rate for corporate taxes in OECD countries was about 26%, down from about 34% in the 1980s.[16]
[edit]2005 US CBO estimates on tax cuts
In 2005, the Congressional Budget Office (CBO) released a paper called "Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates". This paper considered the impact of a stylized reduction of 10% in the then existing marginal rate of federal income tax in the US (for example, if those facing a 25% marginal federal income tax rate had it lowered to 22.5%). Unlike earlier research, the CBO paper estimates the budgetary impact of possible macroeconomic effects of tax policies, that is, it attempts to account for how reductions in individual income tax rates might affect the overall future growth of the economy, and therefore influence future government tax revenues; and ultimately, impact deficits or surpluses.
The paper's author forecasts the effects using various assumptions (e.g., people's foresight, the mobility of capital, and the ways in which the federal government might make up for a lower percentage revenue). In the paper's most generous estimated growth scenario, only 28% of the projected lost revenue from the lower tax rate would be recouped over a 10-year period after a 10% across-the-board reduction in all individual income tax rates. The paper points out that these projected shortfalls in revenue would have to be made up by federal borrowing: the paper estimates that the federal government would pay an extra $200 billion in interest over the decade covered by the paper's analysis.[8]


[edit]Other empirical data
Laffer has presented the examples of Russia and the Baltic states, which instituted a flat tax with rates lower than 35% and whose economies started growing soon after implementation, in support of the Laffer curve. He has similarly referred to the economic outcome of the Kemp-Roth tax act, the Kennedy tax cuts, the 1920s tax cuts, and the changes in US capital gains tax structure in 1997.[1] Others have cited Hauser's Law, an empirical observation that US federal revenues, as a percentage of GDP, have remained stable at approximately 19.5% over the period 1950 to 2007 despite significant changes in margin tax rates over the same period, as supporting evidence.[17] However, since the Laffer curve is based on the theory that decreased tax rates result in greater tax revenue through increased economic activity, any study normalized to GDP is not really saying anything about the Laffer curve.
The Adam Smith Institute stated in a 2010 report that "The 1997 Budget in Ireland halved the rate of taxation of realized capital gains from 40% to 20%. The then Minister for Finance, Charlie McCreevy, was heavily criticized on the grounds that this change would reduce revenues. He countered by predicting that revenues would rise substantially as a result of the lower tax rate. Revenues rose considerably, almost trebling in fact, and greatly exceeded official predictions."[15] The effects of the credit bubble in the Republic of Ireland have not been included in this research, although since the bubble burst the taxes collected have proven far from adequate to continue operating the Irish state or economy.[citation needed]


[edit]Optimal taxation
Main article: Optimal tax
One of the uses of the Laffer curve is in determining the rate of taxation which will raise the maximum revenue (in other words, "optimizing" revenue collection). However, the revenue maximizing rate should not be confused with the optimal tax rate, which economists use to describe a tax which raises a given amount of revenue with the least distortions to the economy.[18] Taxation causes deadweight loss to an economy, and the impact of this needs to be considered in conjunction with the amount of revenue raised.[19]

 

Almost half of tax filers have no "skin in the game". They pay no federal income tax.

He made the statement, but has never tried to make it happen. And he won't.

"Fairness" is not his game. Not even close.