The Laffer Curve, Part I: Understanding the Theory

try an IQ curve, looks like you are on the left side of the hill

I find it interesting, gummoboy69, that you do not dispute that a country will collect more revenue if the top tax rate is at an optimal rate, but instead you are concerned that the top earners are making mroe as a percentage of the whole than before. So I ask you, what is it that you don't like, more government revenue (so we can pay for programs helping the poor) or income equality (meaning all are equally poor)?

The optimal rate of taxation for the top marginal earners should be MUCH higher than it is now. The more top earners make, and the less they are taxed-the direction we've been moving in for thirty years-the less money we have to fund anything. Which is more or less what the Laffer/Reaganomics folks wanted: Starve the beast. Kill social spending, dismantle safety nets, etc. And then claim they were forced to because there wasn't enough revenue.

davebot90, the whole question surrounding the Laffer's curve theory is "Where is that optimal tax point" on the curve?

How do you know we're not already to the left of it with so many tax cuts over the past decade?

Evidence: Bush tax cuts never paid for itself. CAD gov did a study on tax cut & concluded that only 30% of the lost rev came back to their coffers after each one of their tax cuts in late 90's. That's what both Greenspan and Bernanke told congress when asked the same question.

The share of the nations income flowing to the top one-tenth of 1 percent of households increased from 7.3 percent of the total income in the nation in 2002 to 12.3 percent in 2007. This is the highest level in the Piketty-Saez data going back to 1913, surpassing even the previous peak in 1928!

Income gains have been even more pronounced among those at the very top of the income scale. The incomes of the top one-tenth of 1 percent (0.1 percent) of U.S. households have grown more rapidly than the incomes of the top 1 percent of households as a whole, rising by 94 percent — or $3.5 million per household — since 2002.

What the proponents of Laffer's theories have given us is a country where the top 1% of incomes took home about 8% of the pie in around 1980. Today that number is around 23%!
I

The tax rate had actually been higher than 70% on the upper incomes and it did not sink the economy. During the peak years of US prosperity after WWII upper tax rates were in the mid-to-high 80's.

Enforcement was probably looser as well. Accounting was less developed. Swiss banking secret was stronger.