oh, and the Laffer curve is total BS

[allen]

From the CBO
projected deficit for 2014: $475 billion


estimated GDP for 2014: $17,606 billion


From the CIA Fact Book

estimated GDP for 2007: $14,560 billion


From the IRS, 2007 tax statistics
number of income tax returns with adjusted gross incomes over $1 million: 391,261

total income of those earners: $1,401,087,152,000

taxable income of that $1.4 trillion: $1,243,801,387,000

2007 GDP = 14,560. est for 2014=$17,606 billion. so that's a 20.85% increase. if we scale linearly:

taxable income: $1,503,133,000,000
# of filers: call it 400,000
amount of taxable income over $1,000,000: $1,103,133,000,000


additional tax surcharge required to balance budget using only income of over $1 million: 43%



current highest tax bracket: 35%

new $1 million tax bracket that would cover the entire 2014 deficit: 78%

So if somebody is worried about future US deficits, then maybe we should start by proposing a new 78% tax bracket for all income over $1 million (with the associated AMT and capital gains taxes to make it stick). And we can negotiate from there.

Comments

[allen]

You know, given the postscript summary at the bottom:

Tax rates fall leading to greater concentration of income at the high end, as tax cuts tend to be focused on the high income earners. While this doesn't lead to increased growth in the economy as a whole (and possibly leads to slower growth overall), it does increase the amount of income that is subject to taxes, leading to (in the long run) greater taxes being collected. Ironically, this policy of benefiting high income individuals also benefits the government, but not most of the population. Somehow this doesn't strike me as being the way Laffer tells it, but unlike with the supply-siders story, it does seem to fit the facts.

I'd be inclined to say that my original statement is correct: the Laffer curve is total BS. Given that the Laffer argument is that, by having lower marginal tax rates for high earners, you make the economy grow faster and thus make up for the lost revenue through growth. According to the numbers, that just doesn't happen. (Which isn't to say that there isn't a relationship between GDP, tax receipts, and marginal tax rates, just that it's not the one that Laffer proposed.)

[nerdranting.livejournal.com]

The Laffer curve is basically the fundamental theorem of Calculus, isn't it? (Taxes collected at rate 0%: 0. Taxes collected at rate 100%: 0. We have empirical evidence that we actually DO collect taxes at a rate somewhere in the middle. So there must be a peak somewhere.)

I don't think that actually is the fundamental theorem of calculus, but it's close.