Laffer Curve for Dummies

(Photo by 401kcalculator.org) (CC BY) (Resized/Cropped)
The now famous Laffer Curve, named after its originator, economist Arthur Laffer, shows that beyond a certain easily reached point, lower taxes yield higher government revenue. In other words, lower taxes are a win-win situation: Individuals and businesses win because they get to keep and spend more of their own money, and government wins because it takes in greater revenues than it would if higher tax rates continue to prevail.
The government gets more money at the lower tax rate because that lower rate encourages investment, business start-ups, and job creation: More investment means more businesses; more businesses mean more jobs; more jobs mean more tax payers; and more tax payers mean more government revenue.
Ever since the late Paul Simon, Democrat from Illinois dubbed this plan “trickle-down economics” in the 1970s, that name has stuck and has become a term of derision. What the Democrat deriders do not remember is that this plan is older than the 1970s. This plan was tried in the early 60s under President Kennedy. His tax cuts more than paid for themselves in less than one year. Although government officials predicted that Kennedy’s tax cuts would yield a nearly $90 billion dollar revenue shortfall, they actually expanded government coffers by more than $50 billion.
Rather than a trickle, this tax cut proved to be a cascade, one Kennedy described as a rising tide that raises all boats. No Democrat, then or now, accused Kennedy of favoring the rich. They do that only when a Republican offers Kennedy’s plan.
Which raises the question: Have you noticed the ever-widening gap between current Democrats and JFK, their supposed darling? He was a tax cutter; he was pro-business; he was a militant anti-Communist; and he was fervidly in favor of a strong national defense. JFK is far more like the GOP than he is like the Obama Democrats. Despite the Democrats’ professed admiration for JFK, they run madly away from his ideas. They have done the same with MLK.
Dr. Michael Bauman is Professor of Theology and Culture and is Director of Christian Studies at Hillsdale College, where he has been since 1988. He also is Scholar in Residence for the Summit Semester program of Summit Ministries. He is a former inner city pastor in Chicago, an honorably discharged Marine, and a former cycling world champion.
Trending Now on Affluent Christian Investor
Sorry. No data so far.
The Affluent Mix
Biden Oblivious To Illegal Immigration Issues... August 2, 2021 | Frank Vernuccio

Rob Arnott On Bubbles, Inflation, And Once-In-A-Generation Investment Opportunit... August 2, 2021 | Jerry Bowyer

The Federal Reserve’s Massive Theft Of Stability... August 2, 2021 | Jim Huntzinger

What To Do About This Difficult Market? August 2, 2021 | David Bahnsen

Letter On The Politicization Of Corporations... July 26, 2021 | Jerry Bowyer

Peak Of The Fake Bull Market July 26, 2021 | Michael Pento

Woodrow Wilson’s Administrative State vs. Gold... July 26, 2021 | Jim Huntzinger

Dividends, Energy, And Crypto July 26, 2021 | David Bahnsen

Whose Side Are You On? July 26, 2021 | Frank Vernuccio

Media, Left Ignore These Dangers July 19, 2021 | Frank Vernuccio

Mark Skousen On FreedomFest And How To Measure The Whole Economy... July 19, 2021 | Jerry Bowyer

Quantifying The Quantitative, Or Making Easy The Easing... July 19, 2021 | David Bahnsen

The Gold Standard Means A Rising Standard Of Living... July 19, 2021 | Jim Huntzinger

Book Review: Brian Domitrovic Reveals The Monetary Genius Of Arthur Laffer... July 19, 2021 | John Tamny

Steve Forbes: Time To Worry About Inflation, Not Hyperinflation... July 12, 2021 | Jerry Bowyer

UFOs Rescue Biden July 12, 2021 | Frank Vernuccio

Read This Classical Economist’s 200 Year Old Warning About Paper Money... July 12, 2021 | Jim Huntzinger

How Central Banks Murdered The Markets July 12, 2021 | Michael Pento

Everything There Is To Know About The Stock Market... July 12, 2021 | David Bahnsen

AT&T CEO: We’re Ill Equipped For Politics, And We’re Spending A Lot Of ... July 6, 2021 | Jerry Bowyer

Internet Bias Distorts National Conversation... July 6, 2021 | Frank Vernuccio

The Halfway Point Of 2021 July 6, 2021 | David Bahnsen

Join the conversation!
We have no tolerance for comments containing violence, racism, vulgarity, profanity, all caps, or discourteous behavior. Thank you for partnering with us to maintain a courteous and useful public environment where we can engage in reasonable discourse.