laffer

[Coklan]

Glen Beck uses a chalk board.  Bullshit is bullshit.

[shutupcaf]

very easy to understand explanation, thanks! definitely helping towards my A2 economics revision!

[Balkance]

oh great! :) thank you

[slimes23]

The rpoblem with the Laffer curve is that right-wingers always assume that we are to the right of the peak. At the moment we are probably slightly to the left of it.

Further, tax cuts can lead to a rise in growth and a rise in revenue as a result of that growth as well as a result of less tax evasion etc. However that extra growth is often above trend and overheats leading to a recession. when grwoth falls back down, budget deficits then rise again. This happened in the UK in the late 80s.

[albertsamerica]

there's no such thing as an "overheat" it is the basic business cycle the explains the "overheat". Booms eventually peak and then lead into recessions, when output begins to fall, along with demand...

[slimes23]

I'm afraid there is. Look at the late 80s or the results of the Barber Boom.

[albertsamerica]

"trend and overheats leading to a recession." It's the business cycle, but i do agree with ur assumption of the right wingers constant belief. During Recessions, revenues usually fall - this has happened in almost every major recession in American history...

[slimes23]

Yes I know. But it's much more pronounced when a nation has hidden its structural deficit underneath a boom as Reagen did in the 80s.

[albertsamerica]

may i remind you that deficits can be stopped by cutting spending? Ever take a look at the CBO historical tables? Domestic and Social spending far exceeded Reagan Defense Spending. Under Clinton we CUT domestic spending and the economy didn't contract...

You hate deficits, stop spending money...

[blandiloquence]

i always used to put tax rate on x-axis and revenue on y-axis.

and remember reading somewhere that the perfect tax rate would be around 60%

[MASTERCHEATER90]

Nice relationship explanation... But i was looking for the reason in cut in revenue actually...

[VPMusiconline]

Reason for the cut in revenue is that if tax rates are increased, there will be less incentive to work and more people will intentionally stay out of work as they believe they could possibly do better living on unemployment benefits. Therefore they are not working (consequentially not generating any revenue for the Government through Income tax for example).

Hope this is of help.

[PanzerDivisionBOM]

Say you're a doctor, and you need to repaint your house. You can either hire a painter to do it, or you can take a week off from work and do it yourself.

But with taxes, you're making less money from your day job, and you also have to pay more for the painter.

In this way, taxes discourage people from utilizing their comparative advantages, as per specialization of labour, and thus inhibit the creation of wealth. Less created wealth means there's that much less wealth to tax.

[RadioFreeWisconsin]

Do you have any idea yourself of what that perfect tax rate is? Are we too high, too low, or just right?

[Mediterraneanblue9]

Schiff owns Laffer

[redreaper123]

Great review

Well explained and concise

yet another great video

[cravebabycrave08]

I think it worked perfectly as a review - especially for AP Macroeconomics students.

[vertexclimber]

@cravebabycrave08 ya lol cuz this is so good for Advanced Placement Econ even though this is a basic basic explanation of the laffer curve. Thanks holden!

[clint8200]

Yeah that was bad. Needs a little work.

[WisdomVoice]

Very superficial, you didn't even explain why revenues fall after a certain percentage!

You should talk about tax basis... what happen to the latter when tax rate exceeds the optimal level!?

keep trying...