The Laffer Curve

My guess is that most people that have come of age since the 80's have heard of the terms, "voodo economics" and "trickle down economics" because these are the derogatory euphemisms that were used by Democrats and their willing accomplices in the media to brand the economic policies of the Ronald Reagan administration.  Folks would have a challenge explaining what those terms mean other that that they were a successful FALSE branding which lead the public to believe that rich people were getting richer and the poor people were getting poorer.  (Funny, how these same lame unprovable charges are still being hurled by the Left today).  However, the real hero of the Reagan economic policy team was Art Laffer, who was the genius behind the Laffer Curve.  The Laffer Curve was the graphical presentation of the economic analysis which proved how reductions in high income tax rates would lead to higher tax revenue receipts due to increased overall economic growth.  In short, an earner paying 40% tax rate on $1M will pay $400K in tax.  But, if you lower his rate to 25%, this will spur that earner to grow and expand which will increase profits.  The expansion allows for plowing some of those profits back into his/her business as investment where the earner could then make $2M and pay $500K in tax.  The earner pocketed after tax an additional $.9M ($1.5M vs $600K) and the government received an extra $100K.  Everybody wins as long as the government does not spend more than the extra $100K  (oops!).  Anyway, Mr Laffer has written an op ed in the Wall St Journal today which, logically, tears apart the notion that a surtax on the super rich (Buffett Rule) today will improve the economy.  Taxing the rich may appeal to some on an emotional level, but people should understand that, by looking at the actual numbers, the less affluent are the one who get hurt in a slow growth economy.  Please check out the article in the attached link.

http://online.wsj.com/article/SB10001424052970203462304577138961587258988.html?mod=WSJ_Opinion_LEADTop