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Reader: Cutting taxes just doesn't work




The Laffer Curve first came to life when economist Arthur Laffer was discussing his theory of supply-side economics in 1974. Laffer was later on President Reagan's Economic Policy Advisory Board and his theory has become important to many conservatives.

The theory is pretty simple. Think of a curve where on the left you have zero taxes (meaning there are no police or fire departments, roads, bridges, military — or we're back to the Stone Age, which most people would have some issue with) and at the other end is 100 percent tax (meaning that there would be no incentive to work or produce anything), which would also destroy civilization as we know it.

The theory suggests that governments should find the sweet spot, where the greatest amount of revenue will be generated with a particular tax rate. Those that currently believe in the Laffer Curve have, more or less, skipped past looking for the "sweet spot" and just focused on the premise that if you lower taxes, the economy will grow so fast that you will always get more revenue. This has been tried five times before, with zero success so far.

In other words, history has shown that if you lower taxes, you always end up with less revenue. Which is probably why when all U.S. economists were asked in 2012 if they believe in the Laffer Theory, 96 percent said no.

I would like to suggest a more pragmatic idea. If you lower taxes, cut spending by an equal amount. If the Laffer Theory actually works, then feel free to increase spending to match the increased revenue. Cutting taxes and hoping for an increase in revenue simply hasn't worked out in the past, and increasing out debt is not something I'm in favor of.

— Kent Jarnig, Monument

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