OMG!!! This is So Kewl!!!

I apologize for the fanboy writing in the title, but further reading of the Telegraph article on the Speaker and taxes notes that Speaker Richardson has hired – – – wait for it – – – Arthur Laffer!!!!!

That kicks ass.

If you don’t know who Arthur Laffer is, well, you should. He’s a personal hero of mine and an awesome supply side economist, credited with the “Laffer Curve” that shows that government can optimize tax revenue at a particular point on an upside down parabolic curve based on the rate of taxation, etc. It’s a very simple idea that has been proved right, though there are still people who do not believe it.

A most recent example is the Bush tax cut, which, after the cut, actually saw an increase in revenue to the U.S. Treasury that was, unfortunately, offset by increased spending.

Well done Mr. Speaker!

13 comments

  1. Erick says:

    Hey, had they not done so much big spending, there would have been. Tax revenue to the Treasury went up big time after the Reagan tax cuts.

  2. Joe Magyer says:

    Not that I don’t respect the concept of the Laffer Curve, Erick, but there are any number of factors that influence Federal tax revenues beyond marginal tax rates. Just sayin’.

  3. IndyInjun says:

    As noted in another thread, you cannot talk about tax cuts increasing revenue during tenures in office in which the money supply DOUBLED, as it did under Reagan and are projected to do under Bush 43.

    The notion that tax cuts increase revenue is utter fiction.

  4. eehrhart says:

    The United States supply of money, outside of coins minted by the United States Mint, can increase only if the private banks issue more by loaning into circulation through fractional reserve bank lending practices. Subsequently paper notes are increased only as they are printed by the BEP on behalf of the banking system and are swapped at par value by the Federal Reserve with private banks for their already issued electronic credits, which are then expunged from the system by the Federal Reserve. Thus, these printed notes merely replace already issued electronic credits on a one-for-one basis. ”
    Source US Federal Reserve”

    What this means is that your contention which seems to be that the US govt. just prints up more money is not in fact the case.

    M1 is constant with respect to the one for one basis mentioned above Indy.

    So the concept that tax cuts increase revenue is fact and not fiction as if you look at the Revenue numbers to the treasury of any government anywhere cutting taxes you will see the increase.

    Tax cuts = increased revenue FACT

  5. IndyInjun says:

    Earl:

    The paper ‘notes’ issued by BEP are actual currency, which is but a small subset of the money supply.

    You will note from your citation “The United States supply of money… can increase only if the private banks issue more by loaning into circulation through fractional reserve bank lending practices. This is EXACTLY WHAT BANKS DO.

    I note that the measure that you selected M1 is the narrowest monetary aggregate, but even M1 increased by 70% during the Reagan years and is up about 35% in the Bush 43 years.

    The broadest monetary measure M3 was discontinued last year because the monetary creation was so blindly fast that the Fed became desirous of hiding it.

    I note that you avoided giving the numbers so I will do it for you….M3 at 1/1981 stood at $2,024 billion and at the end of 1988 stood at $3933.6 billion, an increase of 94.4%. For Bush 43’s first term the M3 money supply grew from $7195.6 billion to $9505.5 billion, an increase of 32% in just FOUR YEARS!!!! The M3 is now being estimated by economists to be accelerating at 10 to 12% annual rates.

    These are the NUMBERS, Earl.

    If you truly beleive that cutting taxes increases revenues, why not slash property tax rates statewide and see what happens THEN????????

    The problem that the GOP in Atlanta has that the GOP in DC does not have is that you gold domers have no authority to create money out of thin air.

  6. IndyInjun says:

    Earl:

    Using your narrower M1 gage the numbers during the Reagan years were $404.3 billion going in and $784.7 when he left office, for an increase of 94%.

    Member banks actually perform the money creation, as your quote indicated, within the guidelines established by the FED.

    The source of the data I cite is found at…

    http://research.stlouisfed.org/fred2/data/M1.txt

    Your conclusions are bogus.

    Once again, you should experiment to PROVE YOUR THESIS by cutting property tax rates first and see if revenue picks up, now that real estate is in a slump.

    Besides, the tax reform I keep reading of is a TAX INCREASE for the vast majority of Georgians, if y’all are serious about replacing the income tax with a sales tax.

  7. IndyInjun says:

    Clarification…

    The 70% and 35% figures I gave in my posting at 8:05PM were from eyeballing the graphs. I included the data in the later paragraphs showing the actuals to be 94% (!!!!!!) and 32%.

    Banks within the FED system create money via creating credit, with certain reserve requirements. These reserve requirements, established in the wake of 1929, have been all but eliminated, beginning in the later Clinton years.

    Another indicator of just how great the money/debt creation has been is that mortgage debt in the USA has doubled in the last 6 years.
    Such mammoth increases have fueled the taxable earnings of banks, insurors, builders, and boosted taxable capital gains (to a lesser extent, given the various ways to shelther such gains.)

    Therefor, you cannot say that massive increases in money supply have not boosted tax receipts.

  8. My only concern is how far will they gouge the consumer. Government loves money. At least with the property tax you have an assessor to kick around and blame, even though the commissioners and city council establish the millage rates. But who spends the money?

    How will the monies be distributed to the counties and school districts? Given the fact that statewide elections are won in the Metro area who stands to win and lose? The rural counties primarily in South Georgia fare? Guess I’m being a bit cynical. The concept is definitely fair, but how far can you trust a politician? The devil is in the details.

    At least someone is creating a dialogue, I guess.

  9. IndyInjun says:

    Maurice:

    You wrote “I’m being a bit cynical. The concept is definitely fair, but how far can you trust a politician? The devil is in the details.”

    Yes, it is. This thread is on CUTTING TAXES, but the legislation in play is a TRANSFORMATION that will likely result in TOTALLY NEW TAXES ON SERVICES, if the sales taxes of the other states that have gone this route are any indicator.

    Broadly taxing all tangible personal property AND services to both consumers and business is the only way these other states keep the sales tax in the single digits. If they exempt business, the rate will almost certainly be double digits.

    The reason that I brought up the increase in money supply is that it is the classical definition of inflation. Increase in prices are the result of monetary inflation.

    Why ON EARTH would the average citizen wish to reward government’s creation of price increases with a tax that increases in lock-set with that money creation? Why would they trade a tax on their bottom line, after deductions, exclusions, and exemptions for a tax on a TOP LINE NUMBER for expenses?

    If services are taxed, one surely would not want medical services so taxed, when they are increasing at 20% annual rates, whereas income is only going up 4%. THAT would be a horribly bad trade.

    I have always monetarily supported GOP candidates to the exclusion of Dems, voted for every GOP POTUS from Nixon to Bush 43, and believed fervently in the GOP platform and party creed – which is more than I can say for most GOP officials. I do not understand HOW and WHERE this fixation on consumer taxation got to be official GOP doctrine. I have invited folks here several times to show me.

    Someone might be creating a dialog, but they sure are not thinking much about the impacts on MOST PEOPLE.

  10. In my opinion, it has nothing to do with cutting taxes. It has everything to do with attempting to find a mechanism to raise more revenue painlessly. Government cannot suck enough money from individuals. When they reach the breaking point, they find a scapegoat to blame.

    At some point, and I’m sure the Republican leadership does, there needs to be a dialogue on what government is responsible for. The dialogue can never stop, because of the dynamic of our government is always changing. Inept people can really screw the whole thing up. It already has, to some degree.

    There doesn’t need to be this huge divide between partisans. Good Lord, most everyone wants the same things. Heck, if politicians were merely honest the cost of government would be cut in half.

    All politics is local, what is the impact locally.

  11. commonsense says:

    Hmm…Laffer ranks GA #1, Laffer gets a job. Can’t wait till those freeloading poor people start paying taxes on milk again

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