tag:blogger.com,1999:blog-7225373.post1089529126473165752..comments2024-02-29T03:34:23.190-05:00Comments on Who Were the Sea Peoples?: Laughing at Laffergcallahhttp://www.blogger.com/profile/10065877215969589482noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-7225373.post-60968723246109928292010-11-24T09:23:11.536-05:002010-11-24T09:23:11.536-05:00Another common misperception is that Laffer thinks...Another common misperception is that Laffer thinks the "optimal" tax rate is that which maximizes revenues. He never said that in the time I worked for him, and I went over his papers from previous decades quite extensively, and he never said that as far as I could see. He never even led the reader to believe that's what he (Laffer) thought.<br /><br />On the contrary, he quite consistently said that people who use static analyses (i.e. ignoring effects in the tax base) will always overestimate the gains from a tax rate increase, and will overestimate the losses from a tax rate reduction. In some cases--like you say Gene--the overestimates can be so bad that they get the overall direction wrong. (I.e. thinking revenues will go up, when in fact they go down, or vice versa.)<br /><br />What's interesting is that federal tax revenues unambigously rose during the Reagan Administration. So when people now claim that "the Laffer Curve has been debunked," they mean that they do regressions blah blah blah and can explain the huge increase in tax revenues by other factors.<br /><br />That may be fine; I haven't vetted those econometric studies. But a lot of people think that the federal deficit exploded in the 1980s because the government was starved of revenue, when no, the opposite happened.Bob Murphyhttps://www.blogger.com/profile/04001108408649311528noreply@blogger.com