Monday, April 10, 2006

Laffer Curve

I'm a big fan of National Review and the online website. If any of you get the chance to go there and look around, you can see why I like it. They speak my language. Anyway, there was an article in the magazine a few issues back that had the Laffer Curve. The gist of it is that as the tax rate is lowered in proportion to the amount of income of the individual taxpayer and business then the total amount of tax revenues increases. Taxing a man at a lesser percentage makes him more productive, and increases the total amount of money he contributes. That baffles liberals (and I mean the tax and spend kind, not "the government can have my money when they pry it out of my cold dead hands" types) and is a great issue for Republicans.
Notice that I said Republicans there and not conservatives. One of the principles of conservatism is limited government. More money in the coffers of the legislature does not limit government. President Reagan was a believer in the Curve and used it as a basis for his revival of the economy. The only thing is, President Reagan actually cut the growth of the federal government.
My recommendation would be to set the tax rate at the optimal angle on the curve. That would put the lowest tax rate in relation to the amount of money being collected. Next would be setting out the federal budget and then cutting it by ten percent. We don't need to slash too much the first year, just enough to make the Democrats howl. Then we would promise that it is just a one time thing and that it is not a sign of a slippery slope of cutting entitlement spending (wink). Now take the tax revenues and subtract the cost of the yearly budget. Less the 10% and the additional income from the Laffer Curve, then we would have a surplus. That surplus would then be used to pay down the national debt. Normal people have to live within their means and pay the bills, Congress should be held to the same standard.

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