Does the Laffer Curve matter?
Posted by George Leef at 12:29 PM
Cato's Dan Mitchell writes about the recent debates over where the revenue maximizing point on the Laffer Curve might be in this šato@Libertypost. Some economists think we're past that point, while others (mega-state types) say that taxes could go up significantly before revenues would drop.
I was waiting to see if Mitchell would obliterate this discussion like the 16 ton weight that used to fall on hapless things in the old Monty Python shows. (That only happened in the cartoon segments. No living things were crushed.) And he did! The vital point to make is that we don't WANT government to maximize its tax haul. We want government to do the few things it needs to do at the lowest cost to the people. The more government taxes and spends, the less ordinary individuals get to choose what to do with their income. Politics has a horrible but inherent tendency to waste money on stuff that makes politicians look good.
The right question to ask is not what tax rate maximizes government revenues, but what is the proper scope of government activity. That's all we should pay for.
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