For the life of me, I can't fathom why anyone takes supply-siders seriously. Because their "theory" has no basis in reality. Now don't get me wrong, I have absolutely no doubt that a high tax rate can stifle an economy. For example, a 99% flat tax would probably be a bad idea. And I consider a 70% tax rate to be far too high and a bad idea. I mean, why should I bother risking $100,000 of my cash, when the best after-tax profit I could reasonably expect might be as high as 6% annually (that's a 20% profit, less 70% tax bill), and I could lose the whole thing. It's safer to just put it in a mattress and wait for tax rates to go down. When you only get to keep 30% of your profit, there's little point in making one.
But the main point of Supply-Side and the Laffer Curve is that there is an optimal tax rate. And that if taxes are too high or too low, you won't have optimal tax revenues. And I agree with that completely. And I can't see anyone disagreeing. Believing this doesn't make you a supply-sider. It makes you a non-moron.
If you care to disagree with me, I guess I'll debate the point with you. But be prepared to be schooled, as you can't possibly win this one. If you agree that a 99.9% tax rate would stifle our economy, then I already win the debate.
Einstein's Beetle Clock
So the real difference isn't whether tax rates can be too high, but what the rates should be. And we have no good idea on that. I'd easily say that 80% is too high and 15% is too low, but after that, we're getting into hazy territory. Especially as I doubt that the optimal rate is some fine-tuned narrow number. In fact, I'm sure there is a wide range of where tax rates could be without doing serious harm to tax revenues.
Rather than supply-side being some overriding theory of economics, it's more like a minor rule which only applies if you do really extreme things to the tax rate; like by making it 90% (which it has been in the past). And it also applies if the rate is too low; which I'm sure many supply-siders would be glad to see. But treating this as an everyday economic consideration is comparable to using Einstein's Special Theory of Relativity to readjust your car clock while driving at highway speed. Sure, the theory does apply, but only at speeds that you're unlikely to reach in your old Beetle.
And whatever the optimal rate is, I seriously doubt that minor fine-tuning to tax rates will have any significant effect on our economy. Like moving capital gains from 20% to 28%. It's quite doubtful that the 8% difference is going to dent our economy to such an extent that we'd lose more revenues than we gained from the rate increase. And I showed that to be the case in my last post. We raised the rate, the economy continued to grow, and revenues went up. Just like we always see. It's not supply-side that wants these tax cuts. It's greed.
Spending the Beast
And even the underlying principle of supply-side is entirely absurd. If "Tax & Spend Liberals" really just wanted more tax money so they could spend more of it, and lower tax rates truly did generate more revenue...then wouldn't the T&S Liberals want the lower rates? Of course they would! Conversely, if "Starve the Beast" conservatives truly wanted to starve the government of funds, wouldn't they wholeheartedly agree to adopt high tax rates, at least for a short enough period to starve off government revenues? Sure. The rich would surely have enough funds to tide them over until the drought was over, and then they'd have the smaller government they so desired.
But no. The people who want more tax revenues support higher tax rates, and the people who want lower tax revenues support lower tax rates. Just as you'd expect to see if lower tax rates generated lower tax revenues. Duh.
How conservatives get away with suggesting that lower tax rates generate more revenue while simultanously insisting that they're against government spending and want less revenue I'll never know. I guess it's because when liberals encounter proponents of this lamebrained theory they're either too dumbstruck to say anything or they relish in the details of the debate, rather than bashing the overall absurdity of the thing.
But that's what needs to be done. To laugh at these people. We just can't take them seriously. Why should we? They don't take themselves seriously. This is just yet another of their little games they like to play, to pretend that they really want higher tax revenues; when all they really want is a lower tax bill. And so they'll recite a few cherrypicked numbers that they haven't even looked at themselves and pat themselves on the back for having scored a few points.
And they'll never listen to your explanations and will insist that you're the cherrypicker. And even if you somehow get them to look at the real numbers, they'll find some reason or another to ignore them. And so why bother. Just laugh. It's all they deserve. They're not actually thinking about what they're saying, so why should we?