Kansas residents have first hand experience with where the GOP agenda leads. While Brownback was governor, they instituted GOP supported tax cuts and austerity measures (and the creation of tax loopholes) pushed by Arthur Laffer and Grover Norquist.
The result? Economic nightmares. Low economic growth. Basically it illustrated perfectly, what every critic of GOP fiscal policy claimed it would do. I have to imagine this left some level of imprint on the residents of Kansas, making them less extreme in their support of the GOP. But I could be wrong, I do not live there.
It was so extreme and such a failure they elected Democrat as Governor for the first time since the Great Depression if I recall correctly. Granted the Democrat was a former moderate Republican but still.
Well, The Laffer Curve is true. Just simple math.
Itâs just that no one really knows where we are on it.
Laffer himself (tax-cut proponent) always suggests that we are to the right of the peak, while itâs quite possible that we are on the left.
Also, cutting specific taxes on some (rich) and not others (less rich) is the real culprit.
Itâs almost impossible that we are to the right of the peak. Every tax cut in my lifetime has resulted in less governmental income. It takes some level of delusion (yes, I think this applies to Laffer himself) to still think we are to the right of the peak.
Thatâs not an argument against Laffer AT ALL. Thatâs just saying that pre-cut, Kansas was not at a place on the Laffer curve where a tax cut would result in increased revenue. Which is actually most points on the Laffer curve. And probably ALL points on the Laffer curve currently occupied in any taxing jurisdiction in the United States.
A marginal tax rate of 90% (the federal marginal tax rate when Laffer was advising Reagan) is pretty radically different from a marginal tax rate of less than 10% (nearly all state tax rates).
Right. I didnât mean to imply the whole idea was wrong. But the way it got sold is we WERE on that part of the curve, so letâs cut taxes and itâll raise tax revenue. We are on the same page I think.
It was 90% until JFK reduced it to 70%. The Economic Recovery Tax Act of 1981 reduced the highest rate from 70 to 50 percent, and indexed the brackets for inflation.
Oh thatâs right. In his autobiography Reagan talked about paying 94% of his marginal income in taxes, but he was probably including FICA and California taxes in that calculation.
He commented that heâd get asked to do a movie and it would pay $100,000 but it wasnât worth $6,000 to him so he wouldnât bother and the movie wouldnât get made. Which of course is exactly the sort of thing that Laffer was talking about.
It was 94% during WW II. Shows what kind of patriot Reagan was. Most guys his age were risking their lives to fight for the country. Reagan didnât want to make a movie because he would have to pay too much in taxes.
Itâs been long enough since I read his book that I donât recall the era he was referring to. You might be right, in which case his net was even lower than that as he would have had to pay California income tax on top of that. Back then his marginal FICA rate was 0%, so that wouldnât enter into the equation.
Donât know if you are being sarcastic when you say things took off. For the six years following the tax cut individual income tax revenues grew at an annual rate of 5.3%. Over that period prices grew at 4.2% and population grew at 1.1% so per capital income tax receipts in real terms were effectively flat.l