There is no placebo effect in economics. Either

[rubato]

Although the party that lies all the time about everything (and hates science) wants you to believe otherwise:

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http://economistsview.typepad.com/econo ... curve.html

Laughing at the Laffer Curve

Via the IGM Forum:

Question B: A cut in federal income tax rates in the US right now would raise taxable income enough so that the annual total tax revenue would be higher within five years than without the tax cut.





Marianne Bertrand, Darrel Duffie, and Claudia Goldin are the disappointing "uncertain" votes out of the many responses to this question. They should listen to Ed Lazear:

This is the Laffer curve issue. There is little (if any) evidence that rates exceed revenue-maximizing levels. See Mankiw, Feldstein.

Or David Autor:

Not aware of any evidence in recent history where tax cuts actually raise revenue. Sorry, Laffer.

Or Michael Greenstone:

All evidence that I'm aware of suggest that cutting tax rates "marginally" from their current levels would DECREASE revenues, even 5 yrs out

Or Kenneth Judd:

That did not happen in the past. No reason to think it would happen now.

Or Anil Kashyup:

May look plausible on a cocktail napkin (or at a cocktail party), but not true empirically in the US.

Or Pete Klenow:

Not enough time for capital to respond much (physical, human, technology), so it would require implausibly large labor supply elasticities.

Or Robert Hall

See previous question. In addition, few studies suggest we are already at the max of the Laffer curve, though we may be close.

Or Austan Goolsbee:

Moon landing was real. Evolution exists. Tax cuts lose revenue. The reasearch has shown this a thousand times. Enough already.

There are many people who have an interest in making you believe otherwise, but tax cuts are inconsistent with deficit reduction -- they make the deficit problem worse.

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yrs,
rubato

[dgs49]

Any economist who would state that there is no evidence in recent history supporting the notion that tax cuts can increase government revenue loses any credibility with that statement, as the evidence is manifest, both with marginal tax rates (Kennedy and Reagan), and with capital gains tax rates (Reagan).

Unless by "recent history" he means, "in the last fifteen minutes."

Most credible economists, regardless of political leanings or affiliation, are unanimous in the opinion that allowing the so-called "Bush tax cuts" to expire this year would be stupid and disastrous. Hence, they believe that a tax increase would be disastrous to the economy.

Clearly, one cannot draw a universal conclusion that decreasing tax rates will increase government revenues; it's difficult to imagine how a zero tax rate can increase revenues. On the other hand, it has often been shown that increasing marginal tax rates does not always increase revenues.

Are any Republican leaders or candidates suggesting broad-based tax rate cuts at this time? What is the point of this question/thread? And even if a tax cut were proposed, it would not be FOR THE PURPOSE OF INCREASING FEDERAL TAX REVENUES, it would be for the purpose of stimulating the economy, with the hope that tax revenues wouldn't suffer too much.

Sometimes the question that is asked is the clearest indication of the motivation of the questioner.

[Scooter]

Are any Republican leaders or candidates suggesting broad-based tax rate cuts at this time?

There is this one guy named Mitt Romney. Perhaps you've heard of him, he's been in the news once or twice, I think:

Romney’s corporate tax cuts would cost about $1 trillion, a 20 percent across-the-board cut in personal income tax rates would run about $3 trillion, and then sundry other proposals (most notably, abolishing the AMT and giving capital gains tax relief to lower- and middle-income households) would cost about another $1 trillion.

Those numbers are over 10 years, but a half trillion dollar tax cut per year is not exactly chicken feed.