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Obama vs. Laffer September 15, 2016

Posted by geoff in News.
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The CBO recently released a report entitled: The Distribution of Asset Holdings and Capital Gains, which talked about the demographics of wealth and non-wage income. But I thought the report was interesting in the way it unintentionally supported the old Laffer Curve, which says that increasing tax rates can result in diminished revenues.

Here’s a plot of the long-term capital gains tax rate (x-axis) vs. the tax revenues the US government received on capital gains (1977 – 2013). As you can see from the chart below, there seems to be a definite trend towards lower revenues as the tax rate is increased. If you ignore the recessions the trend is even more pronounced.

longtermcapitalgainstaxvsrevenues

In 2013 President Obama raised the capital gains tax rate from 15% to 20% (plus a 3.8% tax on incomes over $200K to help fund Obamacare). He is proposing raising the tax to 28% on married incomes over $500K (don’t know why he singled out married people). I submit that his strategy is ill-founded, substituting moral satisfaction for economic sense.

And Hillary! will be at least as bad.

Comments»

1. veeshir - September 15, 2016

the old Laffer Curve, which says that increasing tax rates can result in diminished revenues.

I call it the NY Politician Paradox.

They just can’t figure out that even though the previous 87 times they raised taxes tax receipts diminished, this time, THIS TIME!!!!! it’s gonna work!

2. Cathy - September 16, 2016

Some liberal recently argued with me that Laffer himself claimed that his ‘curve’ was wrong.

*sigh*

He was — and maybe still is — a Bernie supporter.

3. geoff - September 16, 2016

Yeah, sure he did. That’s why he continues (at least as of 2015) to write in defense of the Laffer Curve at the Laffer Center.

Cathy - September 16, 2016

Learned the hard way — peeps like that will believe whatever they want to pull out of their butts, or any other stinky place.

Thanks, Geoff. I know we’re not insane. That’s at least 2 of us.

4. veeshir - September 16, 2016

Never try to reason someone out of a position they were not reasoned into.

Just point and laugh. It gets them angry instead of you.


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