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.
Follow Us
The Affluent Mix
Media Malpractice April 6, 2021 | David Bahnsen
Persecution Of Christians: The 21st Century Crisis Which Is Not Making Headlines... April 6, 2021 | Frank Vernuccio
Audit The Fed? We Just Did April 6, 2021 | Jerry Bowyer
Individualism Is The Critical Key April 6, 2021 | Jim Huntzinger
The Next Crises: Debt And Debasement April 6, 2021 | Jerry Bowyer
Socialism Can’t Solve Poverty, Only Christianity Can... March 31, 2021 | Roger McKinney
What The Fed Really Said March 31, 2021 | Jerry Bowyer
What’s Tearing America Apart? March 31, 2021 | Frank Vernuccio
Solomon On Anger Addiction And The Atlanta Shooter... March 31, 2021 | Mark Horne
EM Capitulation Was A Foreseeable Investor Error... March 31, 2021 | Jerry Bowyer
Freedom Fatality Of The Fed March 31, 2021 | Michael Pento
Exceptionalism In Economic Terms March 31, 2021 | Jim Huntzinger
A Primer On Bubbles March 31, 2021 | David Bahnsen
Biden Spending Leak Triggers Inflation Trade... March 23, 2021 | Jerry Bowyer
Why The Left Is Attacking The First Amendment... March 23, 2021 | Frank Vernuccio
A Risk No One Thinks About Until It Matters... March 23, 2021 | David Bahnsen
Solomon On Strength March 23, 2021 | Mark Horne
The Result Of The Pies And Divine Light March 23, 2021 | Jim Huntzinger
Oil Rises March 23, 2021 | Jerry Bowyer
The Ultimate Cosmic Gamble March 23, 2021 | Terry Applegate
Reflecting On Two Historic Market Crises: COVID And The Great Recession... March 19, 2021 | David Bahnsen
The First Amendment Isn’t Supposed To Be A Partisan Issue... March 19, 2021 | Frank Vernuccio
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.