Art Laffer explains the Laffer Curve

[@chesterg.791]

Art Laffer refering to his profile as the laffer curve really made me laff

[@ImperialGit]

I see what you did there :P

[@rosaluxemburg1670]

The Laffer curve is nonsense. This man is literally a fraud. Trickle Down Economics is bs and creates no jobs, destroying the economy and killing the poor.

[@chesterg.791]

@@rosaluxemburg1670 The Laffer Curve is common sense lol it just gets over politicized and there is debate as to identifying where the top of the curve is. Republicans often over-emphasize that. Trickle down creates jobs? Has a poor person ever offered you a job?

[@chesterg.791]

@@rosaluxemburg1670 I see the fist in your profilenpic... Are you a Marxist? Cus I love debating commies if you're knowledgeable enough. I have a feeling you aren't though.

[@rosaluxemburg1670]

@@chesterg.791 🤣, You think the "Fist" means Marxism? "Commie"? You think Communism and Marxism are the same ideologies?

[@wolfson109]

The hard part is knowing where you are on the curve

[@zerofoxgibbon3923]

@wolfson109 Not really, you simply need to look at tax reveues vs. GDP. It should pretty simple if you passed 8th grade math.

[@tinyrick1081]

@Chris Probably because they cannot focus with you screaming.

[@getmeoutofsanfrancisco9917]

This is very true. Due the complexities and contrasts of market economies, it's not easy to create a basic model depicting the direct relationship between Tax rates and Tax revenue, although they do absolutely go hand in hand nonetheless. There is no single rate which applies to all economies universally, although it can and is calculated on a national level regularly. An interesting factor I believe is seldom spoke on regarding this matter is the relationship between tax rates, tax revenue, and actual economic and consumer growth. The growth that promotes abundance of supply and cheaper prices on goods which quite literally much of the basis of our standard of living we see today, relative to economies with a lack of those same goods.

[@henriconfucius5559]

​@@zerofoxgibbon3923 The problem is that we don't know the curve's shape, nor we know where the point of maximum revenue is located. It obviously depends on elasticities and multiplier effects, but so does government spending. Still, it's a very usefull concept - and a very promising one too.

[@abegohr2576]

@@zerofoxgibbon3923 Lol, no, if you listened you could have understood that its not simple at all, otherwise there wouldnt be debates about taxation inside political organizations that are pro-taxes.

[@danieldoucet8687]

Art also created the Laffer track so people know when to laugh during sitcoms.

[@derekstaroba]

And laugh at the pyramid. The all seeing eye is watching 👀 😅

[@CoreyChambersLA]

Largely the same as the price curve for any product or service, except taxes are by force.

[@raypurchase801]

A difficult concept, explained very simply. Well done. Here in the UK, for a time about 50 years ago, the tax rate on high-earning individuals was 99%. So all of those high-earners went overseas and the government earned zero. When the tax rate was dropped to a sensible level, those high-earners returned and tax revenue increased dramatically.

[@Mster_J]

99% 😳 Were they out of their damn minds! Who the hell would want to give that much of their income away. Did they really think people would pay that?!

[@aperson2020]

99% is be the highest tax bracket on a increasing step. This what stupid people don't get.

[@Dragon-Slay3r]

💰

[@raypurchase801]

@@Mster_J Six months have passed and I've only just seen your comment. The UK had a Labour (socialist) government in the 1970s. The chancellor (bloke who does the economy) boasted to his party that he would "squeeze the rich until their pips squeaked". Stars like Sean Connery, Mick Jagger, the former Beatles and every industrialist and inventor all cleared off to Spain, France and the US where they paid taxes at a much lower rate. Margaret Thatcher got into power, reversed the tax system, HOWLS of anguish from the Left. The stars, scientists and industrialists all returned and the economy benefitted. Socialists don't understand economics. If they did, they wouldn't be socialists.

[@chumleyk]

@@Mster_J Indeed. A lot of people in that position - 99% above a certain high amount, left the country - or at least their 'home residence' was.

[@elsenored562]

It's easy to find out where you are, on the curve. Just lower tax rates. If revenue goes up, then the old tax rate was too high!

[@crouchingturtle6351]

Assuming work hours didn't change and the effort of your work didn't change, revenue will always go up if taxes are lowered. All things being equal of course.

[@AroundSun]

Many of you are looking at this all wrong. What you're failing to see is that lower tax rates generate more production and economic growth (GDP). This is due to the smaller overhead on business, their ability to grow and expand, produce more, purchase more, start businesses, and hire more workers. So, think of an economy with low taxes as a pie that is growing in size. This growth means that there are more businesses in business and more taxpayers paying taxes. So, to make it simple, would you rather have 15% of a pie the size of the empire state building, or 90% of a pie the size of a Volkswagen? The lower percentage, believe it or not, actually correlates with more revenue for the government. Would you rather have 18% of a gigantic economy worth trillions, or 91% of a small economy worth a few million? If your answer is that you want 91% of a gigantic economy worth trillions, you're missing the point. That economy would have never grown to that size with the 91% tax rate, and to make that the policy going forward, will only shrink it. Another way to look at it: You will receive more tax revenue in a robust economy by taxing hundreds of workers making 60k a small 10% tax -- than you will if you taxed a smaller economy that has only maybe 10 or 20 workers making 60k, at a 60% or 70% tax rate. Moral of this story: you will not have that robust economy with hundreds of workers making that 60k in a 60-70% tax environment, only because of that low 10% tax rate is it possible to even have that many workers making 60k, and the nice side effect is more revenue for the government in the end, REGARDLESS of the lower actual rate (%)

[@texasbeta2002]

This is absolutely false. We have 40 plus years of empirical evidence declaring both you and Laffer are dead wrong. This is also the "economist" who tanked Kansas' economy and said Obama caused the Great Recession, despite it occurring 2 years before he took office. He's a hack with absolutely zero integrity

[@ericfernandez6706]

​@@texasbeta2002 Doesn't seem like you know what you're talking about. The recession was caused by artificially low fed funds rate, subsidized loans, and the belief that equity/home prices could only go up. Really taxes aren't the central issue here if you're going to talk about 2008. Laffer is mainly wrong when it comes to monetary policy. he seems to think that we can push rates to 0 indefinitely and run the economy on productivity that hasn't even taken place.

[@henriconfucius5559]

Thank you for making it clear so I don't have to.

[@henriconfucius5559]

@@texasbeta2002 The laffer curve exists, we just don't know the curve's shape or the peak's location. And tax cuts have increased revenue at various points in our history.

[@fl3082]

You're absolutely correct. Let's all remember, the federal income tax rate for EVERYONE prior to 1912 was ZERO. We as a nation didn't get all the way from the American Revolution to the Industrial Revolution on zero revenue. So where did the government get its funding if it didn't steal from its citizens?? Think; the government has already spent 20 trillion dollars it doesn't have, it can print all the money it wants; WHY do they need to take YOURS? Its not about "revenue"; its about "control".

[@Arcticgreen]

There is another point, it is unfixed as far as "percentage taxed" but it is fixed as far as "tax revenue collected". That point is the point where you don't collect 100% of their money, but you do collect enough that they cannot progress, they make JUST enough money to live and pay the bills... and NO MORE. Because they cannot progress, there is no incentive to work, they work for nothing, just working to work more tomorrow, there is no future and no growth, therefore, the economy dies. This is important because it means that you actually hit that "zero tax revenue" point well before reaching the 100% taxes point.

[@thewhiteshadow6098]

That's a great point! Your message of course, and not the point on that curve. Lol

[@freezingcathedral]

​@seraeggobutterworth5247 you're forgetting war exists. war fixes bad economies.

[@dagpepeonik4628]

Now, I would like to see him explain in a separate video, as to why does the peak of the Laffer curve shift? And is it, that he would still encourage its use then?

[@spanishleadershipcom]

right because his 70% was not correct look voices.washingtonpost.com/ezra-klein/2010/08/where_does_the_laffer_curve_be.html

[@chrisrhudy2000]

economic shift items change the curve shape and length. so when the economy is booming there is a bigger pot to measure. and when the economy is constricted the pot is smaller. The laffer curve is a pain for socialists because it proves with math why socialism and communism will never work. just look at east germany after the wall fell to see why.

[@henriconfucius5559]

Because of differences in elasticities and multiplier effects.

[@roosnijbroek5494]

I never tought this sort of stuff could be interesting, but it definitly was!

[@darthhodges]

What he didn't state clearly was that the graph shown was subjective, not objective. By which I mean the point at which revenues start to decrease is not 50%. This inflection point varies by time and place. In the American colonies in the 1770s it was in the single digits and only certain goods were taxed, but widespread disobedience (and armed revolt) made that little bit of taxation an inflection point. There have been documented cases of 10% and of 70% being inflection points. More progressive tax systems like what are used in the U.S., where the rich pay higher percentages than the poor, also complicate any attempt to discuss actual numbers. Interestingly because the rich are more able to move their money around and change where they live or work to avoid paying taxes the inflection point on the rich is lower than the inflection point on the poor. A massive tax hike on the poor is more likely to raise revenue than a hike on the rich as the poor are less able to avoid paying.

[@Blitzkrieg_Wolf]

All these years later, that one scene in Ferris Bueller's Day off makes so much more sense.

[@Fingolfin3423]

Such a simple, great concept by Laffer. Fits well with the Law of Diminishing Returns, another econ 101 concept (and reality). I find it bothersome that lots of people in the comments section here are getting all upset about this. This isn't political, folks, unless you make it.

[@gabbar51ngh]

He's getting hatred because of Reagan. People need to know not everything Reagan and Thatcher did represented these economists. Politicians cherry pick & only push policies which they like. Thus we get half ass results.

[@Fingolfin3423]

@@gabbar51ngh The connection to President Reagan is part of it, yeah. The bigger part, though, is that the Democrat party has over time become more and more for increasing tax rates as a political tool (and in practice - foolishly). A simple example is increasing corporate income tax rates, even though we've seen corporate inversion occur for decades now and a decrease in the size of our corporate income tax base. It's a perfect example of the prohibitive range of the Laffer Curve. These tax rate rates were set too high and resulted in lower federal revenue from corporations. Under the Tax Cuts and Jobs Act of 2017 under President Trump, the corporate income tax rate was reduced from 35% to 21%. This was long, long overdue, as we (the U.S.) had already lost MANY large corporations to Ireland, Switzerland, and other places who offered more attractive financial incentives. They got those revenues (and jobs) while we lost them. The results of this legislation will take more years to show results, but it was a huge step in the right direction for basic economic reasons, especially in a globalized economy. The problem is that most Americans, when polled, want higher corporate income taxes. Some politicians see this and take advantage of this ignorance. I could go on, but the problem is a flawed left-wing political ideology about taxation and "paying your fair share," not former President Reagan. We already have an EXTREMELY progressive tax structure in the U.S., with the lowest-income earners actually paying a negative income tax when we account for transfer payments. I mean seriously, just go do a Google search for taxes paid by income quintiles for a simple start. For anyone who's current and follows the political discussion, you know how this issue has become weaponized to take advantage of people who are financially and economically illiterate. And yes, I'm referring mostly towards people who vote Democrat. I wish it wasn't this way, as they vote against their own interests, as well as the nation's. This is what they've been fed by their representatives and media for years. The irony is that many Democrats supported the tax cuts under President Reagan, including people like Joe Biden who is now the president and saying the exact opposite thing. He's proposed raising several types of taxes, while simultaneously lowering taxes for higher-income earners via SALT. It's a total joke. The vote back during Reagan was overwhelmingly pro-tax cuts, and the results were gigantic. These Democrats have totally devolved in their financial politics since then.

[@gabbar51ngh]

@@Fingolfin3423 Left believes economy is a zero sum game so it's understandable why they believe in higher taxes, believing it would benefit the working class. Maybe in short term but it would eventually lead to Economic stagnation & hurt them in the long term. Which is why average working class in even more market driven economy are doing much better. Left wing has short time preference too they usually just tax to spend it on one time consumables rather than letting it be reinvested in some manner. A republic or democracy slipping into a bloated welfare state with high taxes is natural, when everyone pays unequal taxes yet voting rights are equal then individuals would naturally try to tax one wealthier group to compensate for the rest just because government allows it to happen. This leads to progressive taxation rather than flat tax. I don't think republicans will be able to do much, the way democracy works. Most countries are bound to slip into this trap. Very few are exception. Mostly smaller nations have been able to pull this.

[@PadminiRavindraNath]

Wonderful...sharing with my undergraduate students ( who are rather young).....What could be better than the laffer curve explained by Arthur Laffer himself

[@windwaker0rules]

a crack head?

[@afgor1088]

you're doing your students a disservice. the laffer curve is not borne out in the data and has always been a neat ideological tool to justify tax cuts for the wealthy regardless of the economic unsoundness of such a policy.

[@jeffbrack7617]

I saw Arthur Laffer in the early 1980s at Cal State Fullerton as I was a Finance major at the time. He told a parable that has been planted in my subconscious now for about 40 years. He stated that "one of the first economic lessons we learn as a kid is a terrible one and that lesson is derived from Robin Hood. Robin Hood goes thru Sherwood Forest taking from the rich and giving to the poor-but what happens when the rich just decide to not go through Sherwood forest? or bring armed guards? " the proverbial socialist dilemma of how great socialism is until you run out of other peoples money. Since our current crop of college kids are by and large complete economic buffoons, let me answer the question of what happens when the rich don't go thru the forest. You see Robin Hoods men (government politicians) get lots of support at first from the villagers who seem to think there is after all a 'free lunch' and at first this would seem to be the case. But right off the bat they notice that Robin Hood and his merry men are taking a pretty good slice of the booty from the rich but hey it still beats working right? So the villagers don't plant seed for next year because that is hard work and even risky, you may not even have a crop so why go thru the hassle and toil. Now the rich have armed guards and it is much harder for Robin to loot the rich and Robin's merry men want more money for taking on the armed guards and now even less is going to the villagers. Ultimately the rich don't go thru the forest and it is very hard to find them anywhere. Even so the villagers stay with Robin Hood and urge him onward and upward-find more rich they say and the 'rich' are now people with say two cows instead of one and some are even here in the village...well ultimately this downward spiral has an end game. Robin Hood has no more rich to loot and has to control the unruly peasants who have not planted for the harvest nor have they honed their skills at their trades as it was easier to obtain largess from Robin and his 'party'. The poor peasants are now starving and belatedly come to the realization that they are totally dependent on RH and his gang and they also realize the entire village is in major digression and their very lives are in jeopardy but they are now ruled by Robin and his merry men who only how to take and not produce and are experts in the use of force to obtain their objectives. The end product is Venezuela my friends.. Probably the greatest take away from my time in college was that lecture. The laffer curve works, when Reagan lowered tax rates revenue surged, look at the latest CBO numbers under Trump, tax revenue is increasing though rates are dropping. Why did the deficit explode and is currently doing the same? because EXPENDITURES far outstrip the increase in revenue, the exact same in Reagans tenure..this is why we see this every time- but don't let anyone ever tell you that we have to 'pay' for the tax cuts, they actually brought more money to the table and paradoxically Alexandra and Kamella and Warren should be cheering this as it actually brings more money into the federal coffers, but these modern day Robin Hoods will never be swayed from their dogma with the presentation of facts and the villagers will always blindly cheer them on-until its too late.Ironically, I also had a professor in 'crisis biology' who told me some of the real estate in south orange county California was the best farmland in the world and in thirty years I would be seeing condos pulled out and farms put back in.. I knew my parents had farmland in Kansas selling for around 1k per acre and this made no economic sense. Forty years later, I still live in south orange county and it still doesn't make any economic sense and I'm still waiting for at least one farm to come back and any condo's to be torn down. I hope my college age kids get to see Laffer and let his views sink in as it was quite an epiphany for me that has forever changed my economic worldview. Thank you Arthur, for your insights.

[@lopony7944]

Watching ferris bueller with the subtitles on brought me here!!

[@ledzeppelin1212]

"Anyone know what he called it? Anyone? Anyone? Something -doo economics...voodoo economics."

[@thewhiteshadow6098]

Wow, nice! I either forgot, or didn't realize it was in there. Your reliance upon subtitles to notice it suggests the latter. 👍

[@lopony7944]

@@thewhiteshadow6098 anti-white?

[@lopony7944]

@@ledzeppelin1212 "...um, he's sick... Thank you, Samone..."

[@ledzeppelin1212]

@@lopony7944 "No problem whatsoever!"

[@ZEEECHET]

Laffer owes Peter Schiff money

[@elephantgrass631]

What's ironic is his name is Laffer. But Schiff got the last Laff.

[@FranklySpeaking73]

Thanks Dr Laffer

[@ab-re7uo]

This dude owes a penny to somebody

[@ericfernandez6706]

dude couldnt see a recession coming if it was tatooed on his left ass cheek

[@faithlesshound5621]

In recent times where have we seen tax rates over 90%? In the UK, it was when people receiving state benefits of one sort or another had their benefits reduced by the amount that they earned above a very low threshold. Inspectors were employed to make sure that the poor had no money coming in. That contrasted with the indulgence shown to the rich who didn't want to pay tax.

[@ntsingaz]

great explanation

[@commercialrealestatephilos605]

How does inflation (not so hidden tax these days) impact ?

[@devmeistersuperprecision4155]

Inflation is not what you think. It is the debasement of currency due to the printing of money by the government. But it is really a form of taxation as this funny money pays for the government now but secretively robs you of your purchasing power. In terms of the laffer curve, it can be thought of as yet another tax.

[@chumleyk]

And that's why most civilised countries have income taxes near but below the middle. However, there are stealth taxes, like the uK's national insurance that is an income tax ontop of income tax but because its split from income tax people don't factor it into 'how much they are taxed' in a simplistic manner.

[@amandakolobenisanjie5777]

Thank you

[@charlespoint4290]

Does this mean that everyone, regardless of their income level should be taxed at this revenue maximizing point?

[@AroundSun]

The goal is not to maximize revenue, its to lower the tax rate as much as possible while still being able to fund necessary government services.

[@20alphabet]

@@AroundSun Partially correct. There's a point at which higher taxes _decrease_ revenue. And there's a point at which lowering said taxes begins to generate higher revenue. Hitting the "sweet spot" is what Laffer's Curve illustrates. Think of it as a visual example of the Law of Diminishing Returns... or too many cooks in the kitchen.

[@henriconfucius5559]

No. Just if the goal is to maximize revenue... but is this what we want? Probably not in most situations.

[@rawisbetter3136]

The democrats can fuck up a laffer curve. When the economy grows or not they want government expansion which they basically piss our money down the drain only to want more government expansion that requires more revenue so they can piss that down the drain.....thus is why socialist democrats hate the laffer curve. Because the moving laffer curve shows the points shifting because they are stealing. Plain and simple. If the government actually spent less they need less giving us more thus causing an economic expansion as in trickle down economics. Yes the rich get richer but the poor also get richer. Doesnt mean there is never going to be poor people. Socialism creates poverty by destroying the free market engine that helps everyone willing to work. Only thing our government needs to do is destroy cronyism not capitalism but the leftist sheep have been told they are the same so the GOBERMENT has to seize control and deal out the money equally...yeah that bullshit never ever works because GOBERMENT is CRONYISM AKA SOCIALISM/COMMUNISM

[@devmeistersuperprecision4155]

The laffer curve makes absolute sense. Some may argue that its subjective nature makes it unusable. They miss the point. Another curve that is false in this Keynesian dystopia is the Phillips curve relating inflation to employment. Fiat money creation is the root cause of inflation and not employment.

[@RorkesDriftVC]

The Laffer curve has as much economic validity as mercantilism.

[@edwardspence8998]

the Laffer curve does point out that taxing people to the point where their work isn't worth it hinders revenue as people deliberately earn less to avoid taxes. It also shows that above a certain percentage that high earners are finding ways to avoid paying tax on extremely high and in some cases, unspendable amounts of income. hire a dozen accountants for a year to find these loopholes and close them. what would the curve look like then?

[@pawankumar47115]

no body can explain laffer curve better than you ..sir

[@214Rosales]

Coach Murray the goat 🐐

[@henrysevern]

Good video even though it is 6 years old. What is the optimum tax rate 40 or 50% or is it lower, the amount of work can also be effected by culture and other pressures. For example if there is a war on and all taxes and work is needed for that to defend the country. Ukraine would be an example.

[@yitzhakmalul]

Great video.

[@MrIvesston]

Is the laffer curve saying a 50% tax rate is ideal? If so, that’s hard to believe. I think 1-2% is ideal

[@raffaeledesimone7417]

To me it's still really simplistic. It does not take into account the benefits that would be provided by the specific tax rate we are considering. It should be adjusted with this other variable, which obviously is different for each country, therefore the model should be three-dimensional

[@thewhiteshadow6098]

That's a cool idea.

[@randyreynolds1045]

Smartest economist ever❤

[@tor9273]

The curve is accurate in theory. But you can't say at what set of tax rates revenues are optimized, especially since the curves shift constantly based upon a billion unmanageable variables, so it is worthless as a tool for determining tax rates.

[@AroundSun]

You're thinking about it wrong. The optimal tax rate isn't the one which increases the most revenues for government, the optimal tax rate is the one which provides the necessary revenues to fund only essential government services. If it's any higher, it needs to be lowered even more.

[@npSylarpp]

You could say the same thing about almost every other economic model , the objective of models is to inveatigate how certain key variables interact with each other and not to yeild spicific measures a la physics

[@stevet1396]

@Chris you say that but the government certainly does not balance it's book. They just borrow more, so position on the curve is irrelevant to them... Unless it is election season.

[@henriconfucius5559]

Good point, but I wouldn't say it's worthless. It teaches us that we must be extra carefull when making tax reforms, *specially* when we increase taxes. And by pure probability any tax decrease is better than any tax increase.

[@henriconfucius5559]

@@AroundSun We are talking about optimization of revenue. Whether the point of maximum revnue is desirable or not is up for debate. I personally think the money is better off in my pocket than in the hands of irresponsable politicians.

[@edwarddejong8025]

Hard to believe that politicians like Bernie Saunders still don't understand this curve.

[@lenforstell1139]

And therefore easy to believe why he’s so popular.

[@EasyTaxes-ny7qd]

excellent

[@jimmillward3505]

In the UK we have flown off the top of the chart and business's everywhere are throwing in the towel. greedy politicians have set in stone the total collapse of the UK

[@Jamal-Ahmed786]

I think 45% tax on the rich is that point where most tax revenues can be raised. Anything below and above that reduces tax revenues.

[@viarnay]

You will kill richs then. No one os going to invest and innovate with 45% tax rate

[@festy1987]

「Military Aide : Arthur B. Laffer , the Father of Supply- Side Economics , is one of the most influential economists in American history. He is renowned for his economic theory , “The Laffer Curve”, which establishes the strong incentive effects of lower tax rates that spur investment , production , jobs , wages , economic growth and tax compliance. Among other accomplishments during his distinguished career , Dr. Laffer was the first chief economist of the Office of Management and Budget and a top economics adviser to President Ronald Reagan.The United States proudly recognizes Arthur B. Laffer for his public service and his contributions to economic policy , which have helped spur prosperity for our nation.」 June 2019 White House 　 President Trump Presents the Presidential Medal of Freedom to Arthur Laffer.

[@alexanderluna5497]

Beautiful

[@transkryption]

Awesome

[@brution2000]

The one thing he left out is criminal activity and black markets will sore at the highest tax margins. If you do not provide a reasonable tax for people to work they will not be reasonable.

[@guybrown8971]

If he rotated his chart 90 degrees it would make more sense. .😮

[@rawisbetter3136]

Anyone who argues the laffer curve as not knowing where it starts where it ends is really a leftist....my laffer curve tells me the government takes way to much because they spend our money freviously on a bunch of bullshit and the fact that GOBERMENT is way to big and all they want is to grow it. Then tax you more to pay for it only to grow it until you reach the point of destruction of the economy. You know the democrat way of doing shit.

[@dannychurch7223]

Brad Lincoln same in this country. However they are also buying votes since people on the state payroll are more likely to vote for more taxes. They’re voting up their own incomes.

[@pacobond9997]

I wanted a video about the Laffer curve and saw Laffer himself did one. Though to myself "if anyone should know this shit its him"... I was right

[@TheCrusaderRabbits]

That graph is hard to understand

[@gerhard7323]

"Here's Johnny!"

[@gedhession]

I have a degree in economics and have always questioned its relevance to the real world. On the original napkin that Laffer wrote in 1974 he puts the statements, “If you tax a product less results/If you subsidize a product more results./We've been taxing work, output and income and subsidizing non-work, leisure and un-/employment./The consequences are obvious!” Don't the taxes we pay help output? Don't teachers, policemen, judges, roads and bridges etc. help make work possible? Doesn't the market economy benefit from education, law and order, defense and infrastructure both directly and indirectly e.g. the military industrial complex. Governments can also get income from other sources e.g. ownership of industries and "rents" on resources.

[@gedhession]

So you everything about economics, do you? What about the real world?

[@AroundSun]

No, the taxes we pay go towards one of the following: (1) inefficient and wasteful government services that are not necessary to society, provide no value to the taxpayers who fund them, have too many employees, pay their employees way too much, and are considered wasteful bureaucratic overhead (various government programs, pork barrel spending, pet projects, subsidies, bureaus and cabinets, grants, regulatory agencies) (2) services that provide necessary functions to society, but don't necessarily create growth or produce goods directly that can be measured (Corrections, Courts, Police, Defense, Fire Dept, roads, etc.) OR Services that can be provided at a higher quality for a cheaper price in the private sector (postal service, education, healthcare, retirement investments, charity, unemployment insurance, disability insurance, etc.) Remember, the private sector is always more efficient than the government, by design. Private companies have a limited amount of capital and receive their revenues voluntarily (persuasion). Government has an almost unlimited amount of capital, and receives its' revenues by force and coercion (taxes). In other words, they have no obligation to be efficient. There is no incentive to turn a profit, cut spending, or eliminate waste. The government is not subject to market forces, the price system, or competition. This is why government is *supposed* to be as LIMITED as possible (as outlined in the US Constitution) and only provide the functions of society that are absolutely necessary and cannot be handled by the private sector (courts, police, military). The more money the government has, the less the people have for consumption and production.

[@npSylarpp]

You dont have a degree in economics i can assure you of that, and its not so much that i disagree with you , igs specifically that what you said is full of the popular ( and i mean popular in the "pedestrian" sense) framework of how an economy operates

[@npSylarpp]

@peter burry did you miss the cheaper price bit ,only private business have an incentive to be the most cost effective , if most people as you say couldnt afford private services they wouldnt be maximazing profit , making profit its not about putting the highest price you can think off and running with it , that would jsut create an incentive to the competing firms to bid down prices and reach a stable optimum , ptobably lower than the fiscal price you pay for state services , bear in mind that most of the income of the lower income families is taken by indirect taxation wich constitute the most of the govs ravenue , so stop beliving in electoral rethoric and colourfull narratives of the big scary businesses and the insane belif that they can put whatever price they please on their products and the even more ridiculous belief that "most people " are somehow homeless beggers with no purchasing power when the bottom 10 % in income families owned on average more than two tvs and 1 air conditioner and this as of 1970

[@jecheesecake]

If you are a Keynsian economist then yes you are right. We can pay one group of people do dig ditches; then pay another group to fill them back in. Problem solved. Economy grows! Voila!

[@danosgaming7450]

Does it have to be a parabola? Could it not have many maxima and minima. How do we know where we are on the curve? This idea looks at only one tax rate. How does this apply to a progressive tax system like the U.S.? Is this looking at short-term effects on revenue or a long-term effect? I dont think tax revenue is as simple as this idea makes it out to be.

[@mytubehkjt]

The key flaw here is that you're only talking about income taxes. Wealth taxes are a looming specter in western countries and they incur a tax rate of up to infinity percent of income. Never ever vote for or consent to any form of wealth tax.

[@josephrichter826]

I think some Democrat politicians should watch this

[@texasbeta2002]

40 plus years of empirical evidence shows him to be an absolute, 100%, hack. Even a modicum of effort would assist you

[@tictoc5443]

@@texasbeta2002 elaborate please

[@charlesrupp3976]

@@tictoc5443 he won't, there is no evidence to support what he said. Art Laffer has messed up many predictions, but his curve is true. He isnt a hack, and that pisses off demand side economists

[@Cajaquarius]

@@tictoc5443 When Laffer's method was tried in Kansas it nearly ruined the state. It doesn't work. It is a bad model.

[@tictoc5443]

@@Cajaquarius maybe because income elasticity of demand was inelastic there?

[@jlepp]

Have you paid your penny to shift yet ??

[@halguy5745]

makes sense to me, untill the point where he assumes the peak of the curve is at 50% and the curve is symmetrical. how does he know its not at 20% or 80% or any other number?

[@crakestone]

He doesnt, thats the point, he just drew it this way, so it looks easier... If he drew it asymmetrical, you could ask why he drew it that way as well ;)

[@halguy5745]

@@crakestone yeah but that makes it an unreliable formula, it can't predict anything

[@crakestone]

@@halguy5745 well, thats what he says in the Video, its not for predicting anything, if anyone knew the exact Formular, he or she would be rich

[@halguy5745]

@@crakestone so the whole formula might as well be meaningless and never apply to real life

[@crakestone]

You just dont get it i guess :/ There is no formula!!! Nobody knows it, the point is, that this curve is real and applies in real life, the big question is where the point of maximum tax flow is... Thats basic economics and science...

[@vivianoosthuizen8990]

The economy will boom with higher wages people will spend more and government will collect more taxes. So neither governments nor individuals will need to live off borrowed money and debt paying interest rather than taxes not a good idea. Economists should study accounting and stop messing with theories based on centuries ago nonsense that has brought us to a world run by banks

[@50351181]

@Vivian Oosthuizen yeh you go to tell those bankers in Wall -street. Tell them to live in a country where you can’t lend out money to others and collect the the interest from them. Obviously the mortgage business would not be exist.

[@surefire07]

Pure hypothesis. It is hard to find the negative revenue growth i.e. the optimum tax rate. So many other known and unknown parameters are affecting the the required government revenue and optimum tax rate. I do not think this is possible in the democracy because the US president has only 4 years any change in tax rate may not bring the measurable result in 4 years.

[@jlepp]

Pay your penny .!!

[@gabbar51ngh]

Not just Ibn Khaldun but chanakya suggested that when a part of a Kingdom is destroyed, you don't tax it and let it develop until it's taxable. Thus acknowledging that lower or no tax rates help the economy. Not exactly laffer curve but quite obvious that lower taxes lead to more development

[@rjeefamily926]

The world is too complicated for the laffer curve to decide policy. This is a very simple pedagogical tool not a specific calculation, laffer says this in the video. In reality the curve would not have such a consistent shape across different tax levels. This also assumes a flat tax rate, with graduated taxes and where graduations are placed all effects the output of the economy and revenue from taxes. This also treats taxation as a simple drain sucking resources from the economy, the truth is that government spending and investment effects economic activity and ultimately total productivity. Not to say we should tax at some crazy high rate but trying to simplify the world is were we stumble into peril. The first thing you learn in economics is no action occurs in a vacuum. Everything interacts meaning our world is one complicated place needing careful examination and calculation.

[@AlexTechie]

But your favorite politician has all the answers and should centralize all planning.

[@IsmailMakhloufi-mn2ez]

from succession

[@legokid356978]

he looks like a low budget Jack Nicholson

[@esqueejy]

And he's more insane than Jack was in Shining. Total idiot.

[@2002kirbow]

Jordan Belfort looks older now...😲

[@Fried52]

Here is the latest example of Laffer's bogus theory. The Ryan tax cuts. The Congressional Budget Office (CBO) estimated in 2018 that the 2017 law would cost $1.9 trillion over ten years. Together with the 2001 and 2003 tax cuts enacted under President Bush (most of which were made permanent in 2012), the law has severely eroded our country’s revenue base. Revenue as a share of GDP has fallen from about 19.5 percent in the years immediately preceding the Bush tax cuts to just 16.3 percent in the years immediately following the Trump tax cuts. Trump administration officials claimed their centerpiece corporate tax rate cut would “very conservatively” lead to a $4,000 boost in household income. Research shows that workers who earned less than $114,000 on average in 2016 saw “no change in earnings” from the corporate tax rate cut, while top executive salaries increased sharply.

[@LonelyOutlaw]

Did anyone else get here from a Ben Stein/Ferris Bueller rabbit hole? Because I sure just did.

[@kaphdy7763]

Thank you for your kind explanation in a nutshell...

[@nerdimmunity6690]

This is too complicated for every lefty in the western world to understand.

[@AlexTechie]

We need to draw parallels from a Harry Potter book.

[@raindrozest9558]

This is absurdly stupid.

[@ZacharyClark-w4w]

I agree. Common sense is not so common, after all.

[@AaaaandAction]

Has anyone actually tested this theory?

[@thadrepairsitall1278]

I really wonder what the real shape of the Laffer curve really is. I bet it it not a parabola.

[@joshuagharis9017]

Inapplicable, everyone is in a different tax bracket, it takes the average. If you lower taxes on bottom, and raise slightly on top,more revenue

[@britoca]

So this chart is wrongly constructed: Revenue is a function of Tax Rate in this case, therefore Tax Rate should be the x-axis, and Revenue the y-axis. If that were the case, no one would have to explain anything since the plotted function would be easy to read and understand instead of this... "drawing". This "drawing" in the video is a great example of a bad attempt at representing something simple to understand.

[@ZacharyClark-w4w]

I agree that the graph could be better constructed as you described, though I still think that Laffer did a great job of explaining it.

[@loghnywarriors2398]

Ibn Khaldun Low Taxation Method

[@vivianoosthuizen8990]

If you increase wages then the portion of taxes paid by wage earners will increase as well Nearly all income tiers above $100,000 paid higher shares of total income tax in 2015 than they did in 2000 (though the shares for many high-income groups fell in the early 2000s, following enactment of major tax cuts in 2001 and 2003). For example, the $2 million-and-higher group paid 20.4% of all tax in 2015, up from 17.2% in 2000. The share for the $200,000-to-under-$500,000 group rose to 20.6% from 14.9%. Some of those shifts may be due to changes in the tax laws or to what’s known as “bracket creep” - the phenomenon in which inflation pushes people into higher tax brackets.

[@januszwisniewski868]

Please send this to your far right friends who think they are liberals

[@barrycalvert8219]

This guy is a salesman for the billionaires. They should be taxed at 90% and you should be taxed at 5% until no one family, man, etc. Is worth more than 3B.

[@jaicabryizky6987]

Great video. Very informative. Best part is that it was not oozing with political bias, like most political / economic topics these days (the Keynesians would be displeased over that 😅😆...) Well done!

[@TheJohnCube]

The man the myth the legend

[@texasbeta2002]

the hack

[@tomselden2685]

Why does he keep making the Illuminati symbol?

[@MarGar-GarMar]

Tax the rich, said the fools

[@lynettemojica6503]

But it's not a perfect parabola as shown..... js

[@getmeoutofsanfrancisco9917]

​@Ser Aeggo Butterworth Yes, he did cover it. I see many comments claiming he didn't, in many different forms. It must be conveyed however that nations derive their economic wealth through different means and factors separate from one another.

[@henriconfucius5559]

It could be, but we don't know. It's shape changes over time with elasticity and multiplier effects.

[@Hawkgoulet]

In a vacuum but not in the real world.

[@impactliving4395]

He did say that the graphic and concept are a teaching tool and do not represent the actual numbers of any specific government. Are you saying that the general concept of this curve does not have real-world applications? If so, why not? Is there evidence against it?

[@markothwriter]

Bueller, Bueller?.... Bueller?...........

[@Jjj53214]

The Laffer curve erroneously assumes that the purpose of the tax rate is to maximize government revenues. That is incorrect. The purpose of the tax rate is to attain the target level of government revenues to finance government spending. The intended level of government spending determines the tax rate, not some notion of maximizing government revenues.

[@mikearwood5100]

Funny thing is when the tax rates went lower the revenue did increase for the consumer, who then spent more money, thereby creating more tax revenue for the state and federal governments. We learned this in highschool economics. Too bad no one seems to grasp this.

[@Jjj53214]

@@mikearwood5100 Please show your evidence for this claim. Just saying so, doesn't make it so.

[@GEEZE-wx2sq]

And nobody is laffing 😢

[@davidlucas4121]

This is baloney. If a 100% tax were imposed for individual sums of wealth above some astronomical amount, say 3 billion, do you really think that entrepreneurs would say to themselves “if I can only make 2 billion but not 20, I have no incentive, therefore I choose not to start a business.” Of course not.

[@pylianpbappe8898]

David Lucas lol do you know what “100%” means?

[@henriconfucius5559]

We are talking about the long run here. Of course you can get rich by killing everyone and robbing them their wealth, but it will eventually run out, as your revenues are ZERO.

[@jayvizzle9351]

Thank you Cenk

[@JoelAdamson]

"Something d-o-o economics"

[@barrycalvert8219]

His explanation is simple, and easy, but he forgets to tell you everyone isn't a worker. He is a schmuck

[@r3dp1ll]

basic. would be good to get an ideal number. From what I can see it seems like high taxes for the wealthy are beneficial to all (even the weathy) as the society gets more equal, less crime .. Denmark seems like a good example. Very hight taxes though.

[@dwayneorubor5322]

20% is ideal percentage and Denmark has been reducing its marginal tax to 55 percent.

[@henriconfucius5559]

The lesson extracted from this is exactly the opposite. It's ALWAYS better to be below the point of maximum revenue than above. The thing is we don't know where this point is located. Still, it teaches us that we should be careful when planning to change the tax code... *specially* if we're talking about increasing taxes.

[@mercedbread9045]

Listen to 2:06 again

[@BossySwan]

Laffy McLaffface

[@h_ash7880]

you look like dafoe

[@viarnay]

This guy desyroyed socialism in minutes

[@edpiv2233]

70 Marxist thumbed down your video. At least they figured out how to use a smartphone.

[@20alphabet]

He's 78 years old.

[@esqueejy]

And he's been wrong for all of them.

[@20alphabet]

@@esqueejy Lol, hardly.

[@esqueejy]

59 years of supply side economics and tax cuts never having "paid for themselves" even remotely, not once...yeah, he's wrong. @@20alphabet

[@20alphabet]

@@esqueejy You don't remotely know what you're talking about.

[@henriconfucius5559]

@@esqueejy Kennedy did it and it worked wonders. There are various other examples. The thing is that neither you nor most politicians understand the concept.

[@madlang_GM]

Here to learn about voodoo economics.

[@mikedebnam2412]

This is all wrong and we have the last 40 years to prove it. Low tax rates after a certain point do nothing other than allow the richest people to store more money. Money to not being circullated is money not driving something like infrastructure and other projects. Things that employ people and hand out contracts to millions. Those things require supplies and equipment and those that supply those things grow and invest in more employees and equipment and so on. The ripple effect is amazing for both the rich and not so rich. But it's not happening and hasn't happened for 40 plus years. Trickle down was and is still one of the biggest lies sold to us.

[@jecheesecake]

Sorry not following. If you tax people and companies more, you are saying that they will have more money to pay their employees and fund new technologies and projects? My experience is exact opposite. If you look at the inflection points of the curve, let's assume 25% and 75% tax rate, both of which will give the same tax revenue (x-axis), your theory is that companies paying 75% taxes will be more willing to increase wages to employees and invest in new technologies than companies that pay 25%. Sorry, that is not been my experience.

[@mikedebnam2412]

@@jecheesecake demand has a stronger influence on investment over tax cuts. there are also plenty of occasions where companies were given significant tax breaks and just ended up laying off a bunch of people. if the taxes gained can go towards things like say infrastructure the impact on the economy overall is actually felt. basically creating more work with better pay actually moves economies. already wealthy people who get tax cuts usually hoard their wealth whereas regular people who have an increase in wealth tend to spend. the ripple effect is much stronger when the vast majority of the people have more discretionary spending available to them.

[@lairdey]

That is fallacy beyond all comprehension. The presupposition first of all that the money goes where a bureaucracy tells you it’s gonna go remains to be seen. Secondly, if you set a national income average and decide that there is a ceiling on the potential of the individual, no one has incentive to take the necessary risks to bring goods, services and businesses to market when they can’t make anymore than the worthless, unproductive slugs that don’t want to do anything with their lives. If you want to collapse a society, income equality is a fantastic way to do it.

[@mikedebnam2412]

@@lairdey what type of fallacy are you speaking of? Looks as though you just think I'm wrong. I'm assuming you just think I'm wrong. At any rate, the lafer curve is deeply flawed. It assumes at it's core that the players in mind have a genuine interest in doing what's right economically for everyone. But they don't. They only really care about increasing profits and dividing those profits amongst themselves and shareholders. Little goes back if any to employees, research and development and the like. Look it's a disproven theory and not really up for debate.

[@ZacharyClark-w4w]

Were you listening to the video at all? Laffer said that (and this is a paraphrase) below a CERTAIN POINT, raising tax rates increases government income. By extention, lowering tax rates below that SAME POINT reduces government income.

[@danatufts9205]

If you don't have a perfect model of the economy, you won't know exactly where you are on the curve. However, look at what happened every time tax rates were cut (by Presidents Coolidge, Kennedy, Reagan, Bush, and Trump): federal revenues increased significantly. So almost certainly, to this day we are STILL on the wrong side of the curve. It's tragic, all the economic growth (not to mention government revenue) that has been forfeited over the last century due to oppressive tax rates.

[@richardparsons252]

It would be good to see what Art has to say about handouts as well...specifically the economic impact associated with taxpayers funding welfare for those who don't try

[@vivianoosthuizen8990]

Oh really same effect can be achieved to pay more for labour then people will spend more and not need to borrow to live. The only reason the rich wants less taxes is to enrich themselves further not to share the economic output with labour but to pocket more for themselves. The lowering of 10% tax for a low paid workers only put at best extra 2k in their pockets whereas for the rich same tax cut gives them extra 200k in pockets to invest on stocks and make themselves even richer

[@bobthebear1246]

The Laffer Curve: Too Simplistic

[@rjeefamily926]

​@Chris Young The world is complicated. This is a very simple pedagogical tool not a specific calculation, laffer says this in the video. In reality the curve would not have such a consistent shape across different tax levels. This also assumes a flat tax rate, with graduated taxes and were graduations are placed this all effects the output of the economy and revenue from taxes. This also treats taxation as a simple drain sucking resources from the economy, the truth is that with government spending investment this effects economic activity and ultimately total productivity. Not to say we should tax at some crazy high rate but trying to simplify the world is were we stumble into peril. The first thing you learn in economics is no action occurs in a vacuum. Everything interacts meaning our world is one complicated place needing careful examination and calculation.

[@kopdongyee]

The basic principle of Economics is to make it simple as to explain complicated phenomena.

[@themightykabool]

is it symetrical? bellcurves don't necessarily have to be symmetrical. bezos is XYZbillionaire. will it kill of the monopolies? possibly? but some like bezos, will keep going regardless. is there 100% incentive bar for the average joe? - yes. and will breed more competition for the up and comers. So what's the downside then? does taxation offset the fees the employer is pocketing instead of paying to subsidize the workforce? example: bezos works population XYZ and dumps them when they are no longer "useful" which then the healthcare and unemployment must pick up the slack? example: bezos provides no return goods infrastructure and many returns get junked to the local landfil at the cost of the local tax payer. does taxation offset the stocks of the CEO who makes bonus yet pays nothing back into the company in form of investment? and instead relies on the inflated magical worth of the company by investors to fund R&D.