One comment on “Timmy Elsewhere

  1. D’you not think the Russia example might be oh so slightly due to improved enforcement?

    [I accept that in an economy with high nominal tax rates and massive fraud that means near-zero effective rates, cutting nominal rates is probably essential if you’re going to improve enforcement without destroying the economy – this is not Laffer’s point though]

    Tim adds: That’s actually the point of the paper. They argue that there are limited resources to chase tax dodgers: if you reduce the incentive to dodge through lower rates then those same resources can be more efficient at hounding the hold outs. At one point they argue that mass fraud means that all of the fraudsters are protecting each other, so it’s almost a coordination problem.

    That Laffer was originally talking about growth leading to higher tax revenues is one thing: most of the anti-Laffer argument is now an empirical looking at tax changes and subsequent revenues, so this is a fair use of the phrase “Laffer type effects” I think (which I think is what the paper actually says).

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