6 comments on “Timmy elsewhere

  1. 1) Governments always push marginal tax rates to a little past the peak of the Laffer curve

    2) Therefore we can always increase revenue by cutting the marginal tax rate.

    3) Applying (2) year after year, marginal tax rates will tend to zero.

    4) Therefore the peak of the Laffer curve must be below zero.

    5) I think I must have got this wrong somewhere.

  2. PaulB:

    1 & 2 can both be true.

    This relies on the fact that politicians are sufficiently stupid that despite knowing perfectly well that (2) is true, they never proceed to attempt the first half of (3) by doing anything about it.

    This is of course a long-winded way of re-writing point (1).

  3. Contrary to what everyone else on this thread seems to think, the top income tax rate was reduced in the UK in 1971, 1979, 1988, and 2012. The top rate in the USA was reduced in 1964, 1982, 1988, and 2003.

  4. Applying (2) year after year, marginal tax rates will tend to zero.

    Not necessarily. You can have a decreasing sequence with a non-zero limit. It just requires a degree of sophistication not normally found at the Treasury to grasp the point.

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