Tuesday, August 10, 2010

Where Does the Laffer Curve Bend? Survey Results

The lefties say 60-70%, and I think they’re right.

I also think Mankiw adds an important point: those numbers are based on elasticities, and in the long-run the behavior of elasticities is going to push that value downward. Since almost all taxes that we really care about are enacted with a view towards permanence, this is a huge point. Unfortunately, he doesn’t give a lower bound.

Tyler Cowen thinks that Mankiw’s response is the best, but I’ll go with Feldstein’s: this question isn’t really relevant. What we ought to be plotting is tax rates against some measure of well-being, like per capita real GDP (or even better, it’s growth rate).

Read Ezra Klein’s whole piece.

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