Untaxing   Part III: Examining Tax Policy Based On The Laffer Curve

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The assumptive error in the thinking behind the Laffer Curve is that the US Treasury will not receive any tax revenue when the corporate tax rate for US public companies is zero.

The loss of equity value, the loss of jobs and even the loss of tax revenue are the primary negative consequences of taxing corporate profits.

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Let’s now examine the tax policy based on the Laffer curve (1974).

In economics, the Laffer curve is a theoretical representation of the relationship between government revenue raised by taxation and all possible rates of taxation. The Laffer Curve is used to illustrate the concept of taxable income elasticity (that taxable income will change in response to changes in the rate of taxation).

 

The so called Laffer curve is a serious addition to economic and tax policy thinking.

However the application of the Laffer curve narrowly focuses on the maximum percentage of tax that a government can extract from its citizens. This narrow focus gives students of economics the incorrect belief that governments have a right to continuously extract uneven payments from its citizens. Any government that professes to be capitalistic and democratic uses uniformed taxation as a necessary expedience that should be monitored as close to $0 as possible.

Nevertheless the Laffer curve is a start to bringing some sanity to an otherwise erratic tax policy, which was made that way because the overwhelming power of capitalism has not been correctly defined and therefore not understood or maximized.

We need a clear macro-view of capitalistic economics to achieve the desired goals of government to benefit its citizens by using public companies correctly.

This goal is achieved through the optimized operations of public companies and ownership opportunities for the citizens. In the case of the US, there is no room for any doubt, errors or procrastination because $3.5 to $14.7 trillion of lost tax revenue is at stake. Various negative consequences of a flawed tax policy are addressed here in Part III. This information is only presented to help understand the problem before some practical solutions are discussed in chapter 15 of Part III and in the next Part IV.

Go to (part III) chapter 9: A Clear Macro-Economic View of Capitalism

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