Friday, March 5, 2010

The Laffer Curve Illustrated

There is a maximum rate of taxation, above which people will simply stop paying taxes and either do something else with their money, or hide their income.

A man named Arthur Laffer famously drew this curve on a napkin, forever entering this idea into the public consciousness.

The Cato Institute does a great job here of illustrating this with actual examples...

Summed up - under Carter and the Dems in the 70's, the top tax rate hit 70%. 70%!!!!
By '88, Reagan reduced that to 28% - and the number of taxpayers in the top bracket quintupled. That is, tax receipts were 5 times higher from that group and there were more of them reporting - way more than can be accounted for, even adjusting for inflation and other things.

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