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Laffer Curve

There are many reasons to oppose the Everything Tax being promoted by Sinquefield.   The regressive nature of the tax is primary among the reasons to oppose it.  However, setting “fairness” aside and other considerations, the Everything Tax doesn’t make sense on a statewide level.  Please realize I am limiting the scope of this writing to Sinquefield’s Everything Tax.  I am not arguing against a national sales-tax to replace the income tax nor am I arguing against any of the other ideas to replace the national income tax such as a Value Added Tax or the “Fair Tax”.

When taxes are set at zero percent then the government collects no taxes.  If taxes are set at one-hundred percent then the government collects no taxes because economic activity will cease.  So, as taxes are raised up from zero percent and lowered down from one-hundred percent the government would collect more money in taxes.  This leads to a revenue maximization point where neither raising nor lowering taxes will increase revenue.  I would like to draw attention to four historical examples where movement along the Laffer curve demonstrated how revenues could be raised. 

When Kennedy was president corporate taxes were cut and government revenue from corporate sources increased.  In the 1980s the United States when Reagan was President and the United Kingdom when Thatcher was Prime Minister, both cut top income tax rates and discovered revenue from income taxes increased.

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