Multiple parties are jockeying for position in the aftermath of France’s seismic snap election. The leftist New Popular Front (NPF) insists its ideas should be implemented.
France’s left wing New Popular Front (NPF) - now the largest group in parliament - has called for a prime minister who will implement its ideas including a new wealth tax and petrol price controls.
The leftist alliance secured the most seats in the recent French elections but fell short of the 289 needed for a majority in the National Assembly, France’s lower house of parliament.
President Emmanuel Macron’s Together bloc came in second and Marine Le Pen’s far-right National Rally (RN) party finished third.
France’s parties are now jockeying for position and it’s unclear exactly how things will shake out, but the NPF has insisted it will implement its radical set of ideas.
no, it is propaganda. I mean, “Taxing at 100% also brings no tax revenue” is already a stupid statement, and is Tautologically contradictory, even more so in a progressive tax system (please look up what the even means, statistically believing in the Laffer curve also comes with a ton of other misconceptions about financial policy)
also some history to the Laffer curve, it is an unproven theory that basically always get trotted out by the wealthy to argue for lowering taxes, tho it ironically has been shown to have no predictive power whatsoever.
“Taxing at 100% also brings no tax revenue” is already a stupid statement, and is Tautologically contradictory
It’s not. If you work 40h per week and can do overtime but that overtime is taxed at 100% (because yes, that’s what marginal rate means, it’s the rate the extra income will be taxed), virtually nobody will bother doing that overtime. The handful who do will probably not clock-in because anyway, there’s no point since it will bring no income after taxation.
you’re not very economically literate, are you? overtime pay is not taxed at the marginal tax rate, that’s not what that is.
the marginal tax rate is the maximum rate your income will end up at, that does not however mean that all your income is taxed at the rate.
as a very simplified example, assume you have the tax brackets
- $0-$1000 is 10%
- $1001-$2000 is 20%
- $2001-$3000 is 30% etc…
and you earn $2500, the taxes you will pay are $1000 at 10% -> $100 the next $1000 at 20% -> $200 and the last $500 will be taxed at 30% -> $150
meaning, in this example, you are paying $450 at a marginal tax rate of 30% on $2500. now overtime can bump you up, for example, imagine you work a LOT over those 40h and earn $3200, now you’re in the next tax bracket due to your earnings.
also, the whole point is to deny all income above a certain level, or do you really think your boss deserves 3000 times your pay? because he certainly isn’t working 3000 times harder than you are.
All economic theories are unproven, approximations about how economists think people might behave. There’s a reason it is often referred to as the ‘dismal science’. Quite often they are based on counterfactuals and projections of what might have happened.
The Laffer Curve is not a rule which always reflects reality but it has explanatory power in certain situations, since logically there has to be a point where avoiding taxes becomes more appealing than paying them.
Regan, et al deploying the theory as part of their political rhetoric - potentially in bad faith - shouldn’t discredit the concept itself because doing so would be throwing the baby out with the bath water. It’s an ad hominen attack against an economic theory; a bit like saying capital controls are always bad because President Xi in China frequently uses them.
ok, so scientifically speaking “proof” is a mathematical concept only, physics doesn’t prove shit, chemistry doesn’t prove shit, no other science proves shit.
But economics, like every other science out there makes models, these models when applied to certain circumstances make predictions, we test these models by testing the predictions they make.
The more accurate the prediction the better and more relevant the model, the issue that economics has is that many people instead of looking at the actual science, take the fictional work and claim it reality, mainly because they believe some propaganda commissioned by really wealthy people, to keep their wealth. the Laffer curve is one such example because it allows rich people to invest into lower taxes and increased privatization.
The Laffer curve isn’t bad because Regan used it, it’s bad because it has a track record of not having any predictive capability.
Also, there exist mechanisms by what we punish tax evasion, taking the likelihood of tax evasion into account for the purpose of setting tax rates is self-defeating, in the assumption that any persons want the maximum amount of money for themselves would always try to evade taxes, no mater what the tax rate is.
I think we agree about the nature of scientific enquiry, how it is all based on inductive reasoning and cannot provide the certainty of mathematics. Additionally, it looks like we agree that the Laffer Curve has been used to justify bad policy in the past.
However, I don’t think that the theory has been debunked in the way you are describing. There is broadly a difference of opinion between Keynesian economists who are skeptical of the theory and then Supply-Side economists who endorse it; and then a whole spectrum of views in the middle from Behavioural economists or other schools of thought who are more ambivalent.
Academics who do support the view have done empirical studies over the years that they believe suggest that the Laffer Curve is real, see:
- Romer & Romer, 2007: The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks
- Mertens & Ravn, 2013: The Dynamic Effects of Personal and Corporate Income Tax Changes in the United States
- Trabandt & Uhlig, 2009: How Far Are We From The Slippery Slope? The Laffer Curve Revisited
It’s a matter of live debate in the field regardless of your opinion of the theory.
