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Comment by mseebach | Hacker News Reader

One obvious issue with this argument: The claim that higher tax rates can reduce GDP is from Arthur Laffer and his Laffer curve -- and relates to the total tax burden, and not the marginal rate.

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Also there's a complete lack of a baseline, the GDP growth in 2000 vs 2008 is much more down to global economic conditions than US tax rates.

What would make a more reasonable comparison is if you compared similar US States with different tax burdens in over the same time period.

...which, to me, would suggest that we need more progressive taxation (income, capital gains, etc.) and much less regressive taxation (sales, use fees, etc.). Of course, one can look at the GDP growth rate for the U.S., Canada, and Norway and see interesting results:

http://www.google.com/publicdata?ds=wb-wdi&met=ny_gdp_mk...

It'd be nice to figure out what datasets are available in the Public Data. That's really useful.

One obvious issue with the Laffer curve: Nobody actually knows where the peak is.

No, but that doesn't mean it isn't there.

Most social sciences (including economics) can't very well be exact for the lack of experiments, much less controlled experiments.

If you don't know where the peak is, you can't argue that raising taxes will reduce GDP because you don't know if you're going up the hill or down it.

And that's fine, because that's not the purpose. The purpose is to argue that the relationship isn't linear (as might be intuitively expected), but curved (I don't know what the shape is called).

It's impossible to accurately model the economy of a society, but theories like this can help politicians better judge the impact of their policies.

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