Laffer Curve

[JohnStOnge]

I started off trying to find the old thread on the tax cut bill but when I did a search on "tax cut" I got a message saying that language was too common so it wouldn't search for it. So I started a new thread.

I saw Art Laffer on the Smerconish show yesterday. He made the claim that the 2017 tax cut bill worked. Said it resulted in the highest revenue ever and showed his concept worked. So I checked on it. And, as of now, it looks to me like the claim is very questionable.

As I've said before we can expect Federal tax receipts to generally rise and what you really have to look for is whether there's a suggestion that the rate of rise remained constant or increased. So far that is not the case with the post 2017 tax cut period.

The first page to look at is https://www.thebalance.com/current-u-s- ... ue-3305762. FY 2018 was characterized by the smallest annual increase in Federal tax reciepts since an increasing trend started following the "Great Recession." In absolute terms there was a $0.01 billion increase between FY 2017 and FY 2018. The previous annual increases during the post recession period range from 0.02 through 0.32 trillion.

In percentage terms there was a 0.3% inrease in tax receipts from FY 2017 to FY 2018. The previous annual increases during the post recession period ranged from 0.6% through 13.1%.

The tax cut was only in effect during about 3/4 of FY 2018. But, still, the lowest growth in annual review of the period is associated with the first FY impacted by the tax cuts.

Another page to look at is https://fred.stlouisfed.org/series/W006RC1Q027SBEA. That one shows seasonally adjusted quarterly tax receipts (I tried to find some not seasonally adjusted but no luck). You can get a zoomed in look at the post recession period by clicking on the "10Y" link just above the graph to the right.

You can also hover to see numbers. The highest quarterly revenue number is $2.08 trillion for the 3rd quarter of 2017. Also, you can see a generally rising trend since the recession (though it does flatten out later in the period). The highest quarterly receipts number during the Obama Administration is $2.07 trillion for the 4th quarter of 2016 (the last full quarter of that Administration).

The tax cuts were effective early in the first quarter of 2018. Tax receipts dropped all the way down to $1.10 trillion for that quarter. Since then they have risen, but the maximum of $2.02 trillion is still well below what revenuew were looking like just before the tax cuts went into effect. As noted 2017 3rd quarter receipts were $2.07 trillion. 4th quarter 2017 receipts were $2.06 trillion.

Also, going back to the low increase associated with FY 2018, note that the highest receipts for FY 2018 occurred during the 4th quarter of calendar year 2017. During that quarter, before the tax cuts went into the effect, receips were $2.06 trillion. The maximum receipts number for any FY 2018 quarter AFTER the tax cuts went into effect is $2.01 trillion. So the overall FY 2018 receipts number was helped some by its first quarter being before the tax cuts were effective.

The page with the annual FY numbers does have an estimate indicating the FY 2019 receipts will be $0.11 trillion higher than the FY 2018 receipts. But at this point it is an estimate. Also, if it bears out, the jury will still be out as to what the trend will be. As you can see, there more than half of the year to year increases during the previous fiscal years since the end of the recession (5 of 8) were greater than 0.11.

The bottom line is that if you just independently look at the data yourself they do not support what Laffer claimed. It's way too early to make a confident determination. But if one HAD to make a call at this point one would say the data suggest the tax cuts resulted in lower tax receipts during 2018 through present than would otherwise have been garnered.

[CID1990]

TL/DR


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[Pwns]

The most commonly misunderstood aspect of the Laffer Curve...it's not monotonic.

[BDKJMU]

I started off trying to find the old thread on the tax cut bill but when I did a search on "tax cut" I got a message saying that language was too common so it wouldn't search for it. So I started a new thread.

I saw Art Laffer on the Smerconish show yesterday. He made the claim that the 2017 tax cut bill worked. Said it resulted in the highest revenue ever and showed his concept worked. So I checked on it. And, as of now, it looks to me like the claim is very questionable.

As I've said before we can expect Federal tax receipts to generally rise and what you really have to look for is whether there's a suggestion that the rate of rise remained constant or increased. So far that is not the case with the post 2017 tax cut period.

The first page to look at is https://www.thebalance.com/current-u-s- ... ue-3305762. FY 2018 was characterized by the smallest annual increase in Federal tax reciepts since an increasing trend started following the "Great Recession." In absolute terms there was a $0.01 billion increase between FY 2017 and FY 2018. The previous annual increases during the post recession period range from 0.02 through 0.32 trillion.

In percentage terms there was a 0.3% inrease in tax receipts from FY 2017 to FY 2018. The previous annual increases during the post recession period ranged from 0.6% through 13.1%.

The tax cut was only in effect during about 3/4 of FY 2018. But, still, the lowest growth in annual review of the period is associated with the first FY impacted by the tax cuts.

Another page to look at is https://fred.stlouisfed.org/series/W006RC1Q027SBEA. That one shows seasonally adjusted quarterly tax receipts (I tried to find some not seasonally adjusted but no luck). You can get a zoomed in look at the post recession period by clicking on the "10Y" link just above the graph to the right.

You can also hover to see numbers. The highest quarterly revenue number is $2.08 trillion for the 3rd quarter of 2017. Also, you can see a generally rising trend since the recession (though it does flatten out later in the period). The highest quarterly receipts number during the Obama Administration is $2.07 trillion for the 4th quarter of 2016 (the last full quarter of that Administration).

The tax cuts were effective early in the first quarter of 2018. Tax receipts dropped all the way down to $1.10 trillion for that quarter. Since then they have risen, but the maximum of $2.02 trillion is still well below what revenuew were looking like just before the tax cuts went into effect. As noted 2017 3rd quarter receipts were $2.07 trillion. 4th quarter 2017 receipts were $2.06 trillion.

Also, going back to the low increase associated with FY 2018, note that the highest receipts for FY 2018 occurred during the 4th quarter of calendar year 2017. During that quarter, before the tax cuts went into the effect, receips were $2.06 trillion. The maximum receipts number for any FY 2018 quarter AFTER the tax cuts went into effect is $2.01 trillion. So the overall FY 2018 receipts number was helped some by its first quarter being before the tax cuts were effective.

The page with the annual FY numbers does have an estimate indicating the FY 2019 receipts will be $0.11 trillion higher than the FY 2018 receipts. But at this point it is an estimate. Also, if it bears out, the jury will still be out as to what the trend will be. As you can see, there more than half of the year to year increases during the previous fiscal years since the end of the recession (5 of 8) were greater than 0.11.

The bottom line is that if you just independently look at the data yourself they do not support what Laffer claimed. It's way too early to make a confident determination. But if one HAD to make a call at this point one would say the data suggest the tax cuts resulted in lower tax receipts during 2018 through present than would otherwise have been garnered.

[CID1990]

Something something something Trump something mumble something something


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[UNI88]

Just read the last paragraph ...

The bottom line is that if you just independently look at the data yourself they do not support what Laffer claimed. It's way too early to make a confident determination. But if one HAD to make a call at this point one would say the data suggest the tax cuts resulted in lower tax receipts during 2018 through present than would otherwise have been garnered.

Garnered?



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[Gil Dobie]

"There are three kinds of lies: lies, damned lies, and statistics."

[JohnStOnge]

Something something something Trump something mumble something something

This goes beyond the Trump thing. It's the general idea proffered by Republicans that they can cut taxes without causing revenues to be lower than they otherwise would've been. It's been false every time in my lifetime so far.

I have no problem with low taxes and less government. But this thing where Republicans/Conservatives lie to people by saying they're going to cut taxes and it's not going to reduce revenues over what they would have been has got to stop.

[JohnStOnge]

"There are three kinds of lies: lies, damned lies, and statistics."

That's a cute quote that's been repeated many times but it's a bunch of crap. People can lie in many ways. But the proper interpretation of statistics is a very powerful tool for getting to the truth. When people use that quote you used they are usually trying to AVOID the truth. The data contradict what they wish to believe. So they use that quote.

[Gil Dobie]

"There are three kinds of lies: lies, damned lies, and statistics."

That's a cute quote that's been repeated many times but it's a bunch of crap. People can lie in many ways. But the proper interpretation of statistics is a very powerful tool for getting to the truth. When people use that quote you used they are usually trying to AVOID the truth. The data contradict what they wish to believe. So they use that quote.

Anyone spinning politics and using statistics, is using the statistics that work for their argument. Tell me you are presenting statistics for both sides, or just the side you want people to believe?

[AZGrizFan]

"There are three kinds of lies: lies, damned lies, and statistics."

That's a cute quote that's been repeated many times but it's a bunch of crap. People can lie in many ways. But the proper interpretation of statistics is a very powerful tool for getting to the truth. When people use that quote you used they are usually trying to AVOID the truth. The data contradict what they wish to believe. So they use that quote.

Except that’s not even remotely close to what you do. Your “interpretation” of the Trump economy statistics goes no further than looking at pictures of graphs. You have zero comprehension of what lies behind the statistics because if you did, you’d realize the power of your third sentence.

And oh, the irony of that last sentence.

[AZGrizFan]

Something something something Trump something mumble something something

This goes beyond the Trump thing. It's the general idea proffered by Republicans that they can cut taxes without causing revenues to be lower than they otherwise would've been. It's been false every time in my lifetime so far.

I have no problem with low taxes and less government. But this thing where Republicans/Conservatives lie to people by saying they're going to cut taxes and it's not going to reduce revenues over what they would have been has got to stop.

I don’t give a fuck. The government doesn’t have a revenue problem. It has a spending problem. So, anything that can be done to reduce MY tax burden is great ASFAI am concerned, given that what I DO give them they’re going to piss away on stupid shit like Russia investigations.

[kalm]

This goes beyond the Trump thing. It's the general idea proffered by Republicans that they can cut taxes without causing revenues to be lower than they otherwise would've been. It's been false every time in my lifetime so far.

I have no problem with low taxes and less government. But this thing where Republicans/Conservatives lie to people by saying they're going to cut taxes and it's not going to reduce revenues over what they would have been has got to stop.

I don’t give a fuck. The government doesn’t have a revenue problem. It has a spending problem. So, anything that can be done to reduce MY tax burden is great ASFAI am concerned, given that what I DO give them they’re going to piss away on stupid shit like Russia investigations.

Translation: the national debt doesn’t matter as long as I’ve got mine.

(Or at least until the next donk is in office)

[AZGrizFan]

I don’t give a fuck. The government doesn’t have a revenue problem. It has a spending problem. So, anything that can be done to reduce MY tax burden is great ASFAI am concerned, given that what I DO give them they’re going to piss away on stupid shit like Russia investigations.

Translation: the national debt doesn’t matter as long as I’ve got mine.

(Or at least until the next donk is in office)

You don’t’ comprehend well do you? They have a SPENDING PROBLEM. Giving them MORE of our money is like giving a heroin addict free drugs.

Oh. Wait.

That’s your party line. My bad.

[kalm]

Translation: the national debt doesn’t matter as long as I’ve got mine.

(Or at least until the next donk is in office)

You don’t’ comprehend well do you? They have a SPENDING PROBLEM. Giving them MORE of our money is like giving a heroin addict free drugs.

Oh. Wait.

That’s your party line. My bad.

The kalmunist party wants to see spending cuts as well.

Neither party cuts spending but oh well...fuck it...let’s cut tax revenue anyway and hope for the best.

[CID1990]

We have zero revenue problems in this country.


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[AZGrizFan]

You don’t’ comprehend well do you? They have a SPENDING PROBLEM. Giving them MORE of our money is like giving a heroin addict free drugs.

Oh. Wait.

That’s your party line. My bad.

The kalmunist party wants to see spending cuts as well.

Neither party cuts spending but oh well...fuck it...let’s cut tax revenue anyway and hope for the best.

Well doing the same thing we’ve always done is the definition of insanity.

[CAA Flagship]

The most commonly misunderstood aspect of the Laffer Curve...it's not monotonic.

But it IS gin-and-tonic.

[Chizzang]

We have zero revenue problems in this country.

That ^ is a stone cold fact right there
our Federal Government generates so much revenue they literally throw it away

[AZGrizFan]

We have zero revenue problems in this country.

That ^ is a stone cold fact right there
our Federal Government generates so much revenue they literally throw it away

Which is why I'm tired of giving them mine.

[kalm]

We have zero revenue problems in this country.

That ^ is a stone cold fact right there
our Federal Government generates so much revenue they literally throw it away

Then we have no debt problems either.

[Chizzang]

That ^ is a stone cold fact right there
our Federal Government generates so much revenue they literally throw it away

Then we have no debt problems either.

We have a spending problem... The End

[kalm]

Then we have no debt problems either.

We have a spending problem... The End

We’re $21 trillion in debt. Not the end.

[Ivytalk]

We have a spending problem... The End

We’re $21 trillion in debt. Not the end.

This is the end
Beautiful friend
This is the end
My only friend

[kalm]

We’re $21 trillion in debt. Not the end.

This is the end
Beautiful friend
This is the end
My only friend

This is not the end - it's just another song
It's only one opinion, right or wrong
Open up your heart - just one more time for me
Before we turn to face reality
Don't stop to think
This perfect chance may never come again
This is not the end
Let me use your ears - just for a little while
I've got to find a way to make you smile
This is not my fault, I'm not responsible
These tiny grooves can only take so much
There's only one more thing I have to say to you
So long for now, be sure to keep in touch
This is not the end