Talk:Laffer curve

Terminology

What is a "stylized graph?" I have degrees in math and engineering, and have never heard of such a thing; neither does a Google search turn up any significant hits. Perhaps this should just read "graph?"

vague

"There is serious doubt about the relevance considering a single marginal tax rate."

The relevance of what? Of considering a marginal tax rate? Of the curve? Vague. Surely the curve. But needs clarity.

Graphs removed

Average annual growth in U.S. employment, by top income tax bracket rate, 1940-2011

The U.S. federal effective corporate tax rate, 1947-2011

These graphs were removed because they "have little relevance and provide no context for the section's content". Why aren't they relevant to the Laffer curve? Do we need a source saying that the government gets more revenue when there are more jobs? For those of you who think they provide no context for the article, please say why. I think they explain a great deal. —Cupco 20:44, 3 October 2012 (UTC)

While I agree that economic growth increases government revenue, I don't see that either one of these graphs makes that point. In addition, it would seem to have to have some direct connection to how this applies to the Laffer curve. The first graph is the average annual growth, which seems to suggest an optimal tax rate above 75% for economic growth. Obviously, this is WP:SYN and WP:POV - and at what point does it make use of the Laffer curve? And at what point does economic growth overtake the an increase in the tax? It's SYN on top of SYN, on top of SYN. Then we have the "The U.S. federal effective corporate tax rate, 1947-2011". How does this apply to the Relationship with supply-side economics? Am I looking for the Reagan years here to prove something? Laffer curve? I understand this stuff... imagine a user unfamiliar with this content. The graph has no relation to the content. It doesn't tell the user anything about the topic. Morphh ^(talk) 21:31, 3 October 2012 (UTC)

As we discussed above, there is considerable disagreement as to whether the Laffer curve peaks above 70%, which the majority of the economists and almost all of the peer reviewed secondary literature says it does. The people with an opposing view say it peaks below 30%. The graphs are accurate representations of historical facts, and one of them agrees with the former of the two of the differing opposing views. Do you believe that because historical facts agree with one of the two differing opinions, that means the facts themselves are biased and synthesis? —Cupco 01:19, 4 October 2012 (UTC)

Laffer placed in "Other" Category

I find it curious that Laffer, the guy who came up with the Laffer curver, is slotted into the "other"category near the bottom of the Empiricle Data section, while the "The New Palgrave Dictionary of Economics", which is frankly so large I doubt the co-authors could have studied Laffer curves sufficiently to come up with a great result. Shouldn't the guy who came up with this be at the top of the Empiricle Data section? JettaMann (talk) 17:20, 5 December 2012 (UTC)

government revenue vs. tax revenue

Under "In political discourse", "Reaganomics":

According to the CBO historical tables, government revenue as a percentage of GDP increased from 31.8% in 1980 to 33.2% in 1989. ^[25]

The article Hauser's law, under "History:

From fiscal year 1946 to fiscal year 2007, federal tax receipts as a percentage of gross domestic product averaged 17.9%, with a range from 14.4% to 20.9%.[5] 2009 tax collections, at 15% of GDP...

If "31.8% in 1980" is the same kind of number that Hauser claimed was never far from 19.5%, the article on Hauser's law should note that Hauser's law failed from 1980 to 1989.

If there is a meaningful difference between "government revenue" and "federal tax receipts", either this mention of government revenue should be removed from the article on Laffer's curve, or there should be an explanation that this is a different type of measure, and there should be an explanation of what the citation is believed to illustrate.

Jmichael ll (talk) 03:12, 2 January 2013 (UTC) Government revenue would include state and local taxes as well as federal, so the two sets of numbers aren't really comparable (no doubt the actual figures would be on the CBO website and other reliable sources). --81.149.74.231 (talk) 14:55, 16 January 2013 (UTC)

Records and Analysis

Lawrence, there is a difference between simple records and analysis.

An academic study says, "things must be this way."

Simple record says, "this happened."

A record doesn't say, "what happened could not have been otherwise" but rather "this happened to occur." It's like saying "Babe Ruth happened to have a lot of strike outs during his period of home run hits." Almost anything can serve as a source for the latter, and since this is a simple matter of record, I really don't care WHAT source you want to use. It's just boring news about 2000s tax revenues that HAPPENED to agree with the theory predicted by Hsing in the 1990s. Let's not war about the news, but work together until you're okay with it.SkyWriter (Tim) (talk)

Just to be clear -- I'm not interested in an edit war, but rather looking for how to collaborate on something non-controversial. The controversy is in the theory of what must and should optimize tax revenue (which involves academic sources). The non-controversial material is the simple history of what levels have experienced maximum revenues so far. That's no more controversial than Babe Ruth's batting average. It says nothing about what must or should occur, but rather reports on what has so far. Since the record happens to fall within the range of one academic source already listed in the article, and the Romer paper I added, it is certainly of interest in the article. There's no reason not to list it, and if maximum revenues change to correspond to a different academic theory, then it's a simple matter of updating it.SkyWriter (Tim) (talk)

Recent claim based on blog post

I have removed[1] this recent addition by Skywriter to the section "Tax rate at which revenue is maximized":

and per capita Federal revenues have historically peaked during policy periods within that range. More recently Christina Romer, an economic adviser for President Obama, has also calculated the peak of the Laffer Curve with a maximum tax bracket at 33%.

If one examines the sources, one can see that they don't back the claim, except for a single post from a right-wing blog, which is not RS for this academic issue. The sources are:

• White House, page 411 [2] which is a table of raw data with no discussion.
• Tax Policy Center, Historical Federal Receipt and Outlay Summary [3] which is a table of raw data with no discussion.

An an economist, I can say that these tables do not back the argument being made. More relevantly for Wikipedia, tables without discussion are Primary sources, and cannot be used to justify a position. Doing so violates WP:OR, especially WP:SYN.

• Christina Romer,"The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks" [4]

This paper is about the short-run macroeconomic stimulus effects of tax cuts, and is irrelevant to the Laffer curve, which is about the tax rate that maximises long run tax collection. The paper is irrelevant to this topic, and does not address the Laffer curve at all. A search for 'Laffer' in the article, finds no results. This paper does not back the claim being made. More relevantly for Wikipedia, in order not to violate WP:OR, sources used should be "directly related to the topic of the article, and directly support the material being presented." This paper is neither.

• From the right wing group blog, Ricochet: Right people, Right tone Right place, "The Laffer Curve and New Evidence that Taxes Stifle Economic Output", blog post by Tim Grose [5]

This is a blog post from a partisan blog, and is not a reliable source for an academic issue. As an economist, I can also state that it is wrong and misleading, but that's irrelevant for Wikipedia.

LK (talk) 03:33, 15 January 2013 (UTC)

Lawrence, please refer to the discussion I initiated above. It's difficult to have a discussion while you are ignoring what I wrote.

To repeat, I'm neutral about which sources you would prefer for simple revenue data. There is a difference between an historical occurrence and a theory. Hsing offered a theory (which must be an academic RS), while the White House provided history (and the White House should indeed be a reliable source). As I wrote above, the statement "Babe Ruth happened to have a lot of strike outs while he was achieving his home run record" is NOT something that requires an academic paper, while the quite different statement of "linear-log analysis demonstrates that a home run record has a specific correlation with strike outs" would indeed require an academic paper.

However, at this time the data does NOT support the Hsing paper, which I read in detail today, because the Hsing data itself is flawed. It arrived at the correct number for the maximum tax rate (per actual receipts), but then mistook a maximum tax rate for an average tax rate. An average tax rate of 35% in a progressive tax would give a maximum tax rate of 65%. Conversely, a maximum tax rate of 35% in a progressive tax would give an average tax rate of 19%. Hsing does not distinguish between the two, and he actually says "average", which cannot be supported by the historical receipts. Maximum rates of 65% are not even addressed by Hsing's paper, though they would be required for a 35% average rate.

Hsing's paper, then, cannot be correlated with any of the sources I gave, because they would have supported a 35% max / 19% average, rather than a 65% max / 35% average.

At this time there is no need for me to restore the White House source, since Hsing's paper is so poorly done that there is no way to match it with real history.

I do plan to continue to look for sources, though, because this one isn't well represented by the excerpt.SkyWriter (Tim) (talk)

About the recent additions

Discussion from the user talk pages:

Dear SkyWriter, I truly believe that you are a reasonable person and that you are here to improve the Encyclopedia. However, your additions to the article Laffer curve show that you are not taking seriously enough, our policies No Original Research and especially Synthesis. I don't have much time to edit now, so I won't be getting involved in Laffer curve anytime soon. But please, please do read and take to heart those policies. Especially, I would like to highlight for you in WP:NOR, where it says, "you must be able to cite reliable, published sources that are directly related to the topic of the article, and directly support the material being presented.", and "Even with well-sourced material, if you use it out of context, or to advance a position not directly and explicitly supported by the source, you are engaging in original research" And in WP:SYN, "If a single source says "A" in one context, and "B" in another, without connecting them, and does not provide an argument of "therefore C", then "therefore C" cannot be used in any article." LK (talk) 04:41, 18 January 2013 (UTC)

Lawrence, I also believe you are a reasonable person -- but you've accidentally stumbled into an unreasonable position that's prevented you from addressing my point: not all source requirements are equal.

Do you need an academic peer reviewed scientific paper that needs a 32 dollar payment even to access in order to know that Babe Ruth had a lot of strike outs AND a lot of home runs at the same time? No.

Such a paper may be required to prove a causal relationship between the two, but NOT their corresponding occurrence.

In any case, the Laffer Curve article is in bad shape. Nothing is well defined, and it shows.

The Laffer curve is at 70%.

The Laffer curve is also at 35%.

The Laffer curve is also at 35%. (that's not a typo)

The Laffer curve is also at 20%.

The first is top marginal tax rates on a single tax system (such as France). The second is average tax rates on a single tax system (such as France). The third is top marginal tax rates on a hybrid tax system (such as the United States, where the State and Local taxes are about 20% of GDP and the Federal government is also about 20% of GDP). The third is the average tax rates on a hybrid tax system.

Now, most of the academic journals listed are speaking of the first option, while Hsing is talking about the second option. NONE of them are even calculating what is popularly applied in blogs and news articles as the Laffer curve, and I don't think Laffer does either. That's the problem with the curve -- it's not well defined. Liberal sources tend to look at the calculation that is most natural for top marginal rates on a single tax system, and laugh at Laffer curve valuations in the 20s and 30s as utterly ridiculous and beneath mention. Conservative sources tend to look at the calculation that would apply to a hybrid tax system (since the term is popularized in the United States) and think the Liberal calculations are equally absurd.

Neither is wrong -- they are talking about entirely different things. And the article doesn't even address that. Anyone reading the current article could be left with the impression that BOTH state and federal tax rates should EACH be at 70%!

In any case, the distinctions need to be added to the article. Neither of us have a lot of time. That means we do NOT have time for edit warring. I don't CARE what sources you prefer, but they need to be used in such a manner that has some meaning and context.

The sources I used were specific for the Federal government's share of the tax pie. The sources that are there are for top rates on a single tax system. At least allow that to be mentioned, or Laffer himself would not be able to recognize his own curve.SkyWriter (Tim) (talk) 11:03, 18 January 2013 (UTC)

You are still falling into the trap of OR. Per policy, a reliable source should exist for EVERY SINGLE POSITION OR ARGUMENT. Don't try to figure out the truth by integrating various sources and presenting that in the article. Only summarise the arguments and positions of what is in reliable sources. You additions to the article are a mishmash of OR and SYN. Please stop.

BTW, the Laffer argument is quite clear that it assumes a single tax rate. So, average tax = marginal tax. If a source doesn't mention average or marginal rates, don't attribute such a view to them. LK (talk) 11:18, 18 January 2013 (UTC)

That's not a trap of OR at all. The application of the Laffer curve was to FEDERAL tax rates. Can you even FIND a popular source that doesn't? The academic journals you listed gave two different rates: 35% and 70% as if they disagreed. I had to add the fact that they didn't disagree. That's not OR. It's just reading the material. Even worse, the Hsing article did NOT assume a single tax rate, since it presented itself as a study of FEDERAL tax rates (which by definition are in addition to State tax rates). Your article is nonsense unless it is defined. I invite you to do so, and am willing to help. But it does need to be defined.SkyWriter (Tim) (talk) 11:36, 18 January 2013 (UTC)

Take a look at the chart on page 48 here: http://www.nber.org/papers/w15343.pdf?new_window=1

You can see that the writer is measuring Federal tax rates alone -- not combined state, federal, and local. And you can also see that he is comparing them to other single tax rate countries. So, he is mixing a hybrid rate into a single rate as if they are on the same scale. It's not just a problem with the article, but with most of the papers that address the subject (including Laffer himself). Surely not ALL of the papers make this mistake. But you as an economist can see that the paper does not use a pristine assumption as you assert.

I don't care which rate is "right" or "true." That's not our job as editors. Our job is to say what's out there. Well, the article needs a bit of detail or readers will be just as confused as the writer of that article.SkyWriter (Tim) (talk) 11:47, 18 January 2013 (UTC)

BTW, just for giggles -- calculate the top marginal tax rate if the AVERAGE rate is 70% and the bottom rate is 5%, on a straight logarithmic progressive tax.SkyWriter (Tim) (talk) 12:03, 18 January 2013 (UTC)

I'm done here, if you can't see, you won't. I'm sorry but the additions are uncited and original research, in that they are your conclusions which you draw from the sources, rather than what is stated in the sources themselves. The edits violate WP:V, WP:OR and WP:SYN. I have removed them, I realise that you will likely reinsert them, but I advise against it. LK (talk) 02:11, 19 January 2013 (UTC)

Lawrence -- there are three problems here:

First, as I said, the fact that more per capita revenues were raised at 35% rates is not a matter of interpretation, but history. It's a simple matter of record and does not require an academic source.

Second, academic sources must be put in the context THEY THEMSELVES set. The current state of the article is making those sources say something they do NOT say. The calculations for the Laffer curve are made in isolation -- that is, in the absence of ANY other taxes. As Hsing notes, the average tax burden peaks at 35%, and the maximum progressive tax peaks at 65% - 70%. The economic sources are all in agreement on this, as is the source I initially gave. But it needs to be STATED that these numbers are in the absence of any other tax, or people will think these academic journals are suggesting a 65% rate for the real Federal income tax, which they CANNOT. If the Laffer curve peaks at an average burden of 35% and a maximum progressive burden of 65%, that includes ALL taxes, not just one. Add a 5% SALES tax and the maximum potential for a progressive tax falls to 55%. Or if you have a 20% VAT tax instead the potential income tax rate peaks at 25%. If it's not stated in the article that the Laffer curve includes ALL taxes together, then the article says something the academic journals would never be irresponsible enough to say.

Third, collaboration is different from edit warring. If you don't like a source, improve it. It would have taken you ten minutes to find a source better to your liking, rather than the hour or two you've devoted to avoiding collaborative work. Wikipedia isn't king of the hill. It's a collaborative effort. And if you don't WANT to work with others, then for goodness sake don't get in their way. I've asked you several times what you want here, and I'll be glad to hunt for it WITH you. But edit warring is both counter-productive and a waste of time.

Worse -- it's left the article hanging with the impression that the Laffer curve can be applied to EACH TAX cumulatively. The journals do not say that, and so the article ITSELF is some bizarre OR you've created in the guise of avoiding it.SkyWriter (Tim) (talk) 16:03, 20 January 2013 (UTC)