Hate the Laffer Curve? Try Woodhill's | Hacker News Reader

Hate the Laffer Curve? Try Woodhill's

realclearmarkets.com

Where do the Woodhill Curve figures come from? The article just asserts them as facts, without indicating how they were derived.

He argues that tax cuts create permanent compounding growth in the economy. With even a small addition to the growth rates, the eventual tax returns eventually will pay for the loss of the taxes (even counting compounding interest on the debt accrued due to loss of the tax).

Of course the effects he's talking about are very small, nobody knows how to measure them (they are basically rounding errors in a "what if" projection), and any attempts to quantify them are open to argument. So basically anyone who doesn't like taxes will like the idea, and anyone who doubts the benefits of that will be entirely unconvinced.

My problem with this article is that he basically asks us to assume what he wants to demonstrate:

"Anyone who believes that repealing the corporate income tax, the capital gains tax, and the death/gift tax would not increase economic growth by at least 0.12 percentage points needs to consult a psychiatrist, not an economist."

Edit: The more I think about it, this analysis is silly. Sure, a sustained increase in GDP growth rate will dominate a decreased tax rate in the long term. Unfortunately, what happens during the "me and/or my kids are still alive" term matters. For example in his "you're insane if you don't believe it" scenario where a 3% decrease in tax rate leads to a .12% sustained increase in economic growth, the government would take in less revenue for the first 150 years. In his "what I'd like to believe" scenario with the 3% cut and a .26% sustained growth increase, it would only take like 70 years to break even.

Nice try.

Taking out the partisan-baiting in the article, this could be a nice economics hack. Also note that the author is a software engineer, entrepreneur, and the creator of the hack.

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