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Comment by hiddencost | Hacker News Reader

https://www.washingtonpost.com/politics/2019/06/01/trump-is-... (Archive: https://archive.is/eVC1X )

"Economists tend to roll their eyes when the Laffer curve is mentioned. A panel of elite academic economists across the political spectrum found in 2012 that none of its respondents agreed that the United States was on the wrong side of the curve. Even George Stigler, a leader of the Chicago School of Economics who disliked taxes at least as much as Laffer, described the Laffer curve as “more or less a tautology.”"

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It is a tautology, so I'm not sure why people get annoyed about it. If you look at the curve, it just says the government will get 0 revenue at either 0% or 100% taxes, and the maximum is somewhere in the middle. It doesn't say where, or make any judgments about current tax rates.

Obviously it shouldn't be used for any kind of serious discussion about tax rates, other than pointing out the baseline obviousness that taxing too high is counterproductive.

It's not obvious to quite a lot of people. The fact that government revenues can go down when taxes go up, or go up when taxes go down, is regularly treated as a shocking revelation in forums like the Guardian. As the article states, macroeconomic modelling has for a long time basically assumed that people won't react rationally in the face of government policy changes, sometimes because they implicitly assume global government (i.e. the models don't handle the possibility of people leaving).

The possibility of people leaving really has little to do with the Laffer curve. It's just the simple observation that if taxes are extremely high, people will change their behavior: for instance, if you have a choice between staying in your stable job with mediocre pay and middle-of-the-road tax rates, or taking a big risk to start a new business, but be subject to such high tax rates if you succeed that you'll make no more money after taxes, very few people would even bother starting that new business.

So he was essentially saying it’s so correct that there’s no point in talking about it?

High taxes and strict regulation do have a negative impact on job and income growth in much of Europe, though.

That seems wrong, as most high tax countries (Denmark, Norway, ...) have full employment and very high standards of living for decades now. Do you have a source for that? Eastern European countries catching up with development don't count, see Piketty.

> as most high tax countries

Yet you listed two relatively tiny countries. Which don’t even have (relatively) very high taxes.

France, Spain, Italy, Portugal and Greece etc. all have higher taxes on labor

https://www.oecd.org/en/data/indicators/tax-wedge.html?oecdc...

e.g. Denmark and Norway are closer to US than to France

> have full employment and very high standards of living for decades now

Yet those standards have barely improved over those decades. Prior to 2009 the gap between US and the EU was closing, not it is the complete opposite.

Well the tax wedge as defined on that page measures the sum of taxes and healthcare, pensions and social security combined, not the tax alone. For a working class wage in most EU countries, healthcare plus contributions for pensions and social funds will sum up to be larger than than income tax.

This is often a problem of metrics. US-centric economic views tend to favor metrics we're really good at, but that don't matter to the average person, like GDP.

The US has an absurd GDP. But if you could compare the average American and, say, the average Norwegian, I don't think it would even be close in terms of quality of life. Particularly if we include things such as food, exercise, and education.

> average Norwegian

That’s the problem. You should comparing it only with states like Massachusetts, Connecticut etc. (and even then.. Norway is inflated by oil revenue, IMHO Denmark is a lot more impressive).

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