Taxes...

I've read numerous articles this morning on how the President is sticking to his guns in regards to the Bush Tax Cuts. He is willing to allow some of them to be extended, but not all. Several of the articles refer to his position as "he won't budge." These same articles routinely decry the position of the conservatives in this nation who offer the Laffer Curve as proof of the conservative tax agenda, because the "curve" did nothing to reduce or eliminate the deficit when it was first employed in 1981 by Ronald Reagan. THAT is what I want to address...

I can't go another minute without pointing out that the Laffer Curve, and by extension the entire theory of Dr Arthur Laffer, has never nor will ever promise to reduce deficit spending in any government. It does not promise to balance a budget. It does not promise to instill instant fiscal responsibility on those elected to high office.

What it DOES do is provide a means by which the functioning health of a national economy can be measured in terms associated with revenue and income and the means by which that revenue and income is maintained. That's it... nothing else.

If a national rate of taxation is measured at 0%, then the national revenue will be 0%. If the national rate of taxation is 100%, then the national revenue will be 0%... because no one is going to work 100% of the time solely for the benefit of the government (at least not in a free society). That being the case, there is a "curve" to any graph used to chart this percentage of taxation in regards to revenue, and Arthur Laffer first drew that curve. Maximum revenue in relation to taxation must lay somewhere between a 0% and 100% taxation rate, right?

The means by which this "theory" is tested is one of two methods:

We can LOWER TAXES and see if revenue goes up. If it does, then taxes were too high.

We can RAISE TAXES and see if revenue goes up. If it does, then taxes were too low.

Liberals and progressives seem to think that if we RAISE TAXES, revenues go UP. That is true to a point, but ONLY if taxes were too low to begin with. Both Laffer and Keynes (his mentor) felt that a broader picture of a national economy is best, and that the tax rate should be dictated by the needs of the nation, not by the needs of the government. In a strong, growing economic environment, lower taxes allow greater economic growth to occur, speeding the rate at which an economy can grow and lengthening the time between "contractions".

Moderates (politically speaking here) seem to think that if we RAISE taxes on some of the tax payers and LOWER them for others, we gain in both sides... but it is known beyond question that the people driving any growth in a national economy are the ones with the greatest income, and if they are not allowed to spend their money on new business, more employees, expanded production, more aggressive consumption, et al... so limiting their capital is counter to the goals of economic growth.

Conservatives think that LOWERING taxes will always increase growth and revenue... but this isn't true either, because if it were than the greatest percentage of economic expansion would occur at the lowest rate of taxation above 0%, and this has NEVER been shown to be the case in human history. Lowering taxes when they are too high is what the Laffer Curve proves to be the right course of action, and when this is coupled with an environment that sees economic contraction and a rising market values to fixed commodity resources... the historic trend is typically faster economic recovery and expansion.

Both Laffer and Keynes stressed the need to utilize tools like the Laffer Curve to alter national tax rates to best benefit the national economy. When the economy is BAD, lower taxes and/or increase the government's ability to spend into a deficit. When the economy is GOOD, raise taxes (to balance a budget only) and/or end all deficit spending. Reagan did the former from 1981 to 1986/87... and the economy did a huge turn-around. Reagan raised taxes in '88 and Bush did it again in '90 and '91, but the "recession" was small and as short as it could be and still be called a recession. Then the GOP "revolution" happened, and in less than three years, the US was working without a deficit... NOT because of what Clinton supported as President, but because he didn't veto the "Pay as you Go Act". Unparalleled economic growth, all from the simple (I'm being ironic here) determination to follow the theories of Keynes and Laffer.

Why can't this be understood by anyone else as plainly as I understand it?