A conservative publication, which I will not name, just spiked a book review because I said that the Laffer Curve didn't apply at American levels of taxation, even while otherwise expressing my vast displeasure with the (liberal) economic notions of the book I was reviewing. This isn't me looking for an alternative explanation for the spiking of a bad review: the literary editor accepted it, edited it, and then three hours later told me it couldn't be published because it violated their editorial line on taxation.
I suppose I ought to have known, but I didn't. Go ahead liberals, pile on: you told me so. The Laffer Curve and the supply siders pushing it seem to be the teacher's unions of the right.
are you going to publish your review here, or shop it someplace else?
And you are suprised? Was it NRO?
What did they do with your review of Origin of the Species?
It would be interesting if it were NRO, considering that Ramesh Ponnuru matter of factly stated today that US marginal tax rates are below the revenue-maximizing level. Indeed, he brought up a New York Sun editorial claiming otherwise precisely for the purpose of disagreeing with it:
What are the journalistic ethics surrounding publicising spiked pieces?
Because I'd really like to know what organization did something so intellectually dishonest. (Hah, a situation where that is the only proper phrase) If they are capable of such baldfaced flim-flammery, I doubt they can be shamed, but I think we ought to do what we can. Simply grotesque.
(And then I wonder why I'm always a little embarrassed to think of myself as a conservative. With friends like these...)
forget about the Publisher, name the Book.
Also, the Laffer Curve is all well and good--When you accept the premise that Progressive Taxation is fine and dandy.
Maybe we'd do well to remember:
the 10 measures the proletariat will use to bring about the full realization of the communist utopian dream, once they have the political power:
1.Abolition of property in land and application of all rents of land to public purposes.
2.A heavy progressive or graduated income tax.
3.Abolition of all rights of inheritance.
4.Confiscation of the property of all emigrants and rebels.
5.Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.
6.Centralization of the means of communication and transport in the hands of the state.
7.Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan.
8.Equal obligation of all to work. Establishment of industrial armies, especially for agriculture.
9.Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country.
10.Free education for all children in public schools. Abolition of children's factory labor in its present form. Combination of education with industrial production, etc.
http://www.lewrockwell.com/orig/keller5.html
Perhaps the literary editor is bound in a way that the publisher is not. I think this deserves more exploration. Push them. Post details. Maybe you can convince them they are wrong - or perhaps they'll convince you.
Nice way to take an equivocating cheap shot at unions. Classy.
Mark,
Marx also advocated a scientific study of economics... hmm that must be why conservatives support the Laffer Curve on faith. We can't investigate it empirically... that's just what the commies would want.
One way to check if an allegedly-conservative organization is doing lots of spiking on behalf of its "corporate masters" is if its publications don't mention regulatory capture. That's too obvious a problem for libertarians to overlook but it's also not something big business would want to publicize.
Is it standard practice at political mags to spike invited articles if the authors (who are, after all, named and taking responsibility for their opinions) make a (non-inflammatory) statement that is not in concordance with the magazine's views?
Posts like these are really important, both so we know this sort of thing goes on and for shaming the perps (even if they aren't named).
We told you so.
"What did they do with your review of Origin of the Species?"
Can we stop the charade that liberals accept Darwin's teachings? They ignore everything he had to say about how different races of man evolved to have different capabilities.
I certainly don't "accept Darwin's teachings." He was a 19th century naturalist who had nowhere near the resources or scientific backing of current evolutionary biology. The current state of physical science lends creedence to many of his insights, but has proven as unlikely an equal number.
Hmm, Laffer Curve not apply at current levels of US taxation?
(I'm leaving aside entirely the major issue. They should either pay you a kill fee or you should try to place it elsewhere. Pretty scummy behaviour though.)
There's not, I think, any "one" Laffer Curve. Depends upon the tax as to where the peak is. Taxes on capital, for example, would have a very different peak from those on labour, given the relative mobility of each.
Very difficult to make the overarching statement about gross levels of taxation in hte economy I would have thought.
OT: Notice how Juan cleverly and deceitfully refers to "Darwin's teachings" to implicitly advance the grossly erroneous creationist claim that the theory of evolution is just another religion. No one refers to "Newton's teachings" or "Mendel's teachings"; the phrase is used almost exclusively to refer to the writings or sermons of religious leaders. Those of us who have actually read (and understood) Darwin know what an absurd claim Juan's second sentence is.
I'm not going to say I told you so, because it takes a big person to admit you were wrong. Sorry that happened to you and even more sorry that certain conservative publications won't tap into the vast smart conservative economic commentary--preferring hacks like Larry Kudlow.
Color me unimpressed with your candor. You won't name the conservative publication? Give me a break. By refusing to name them, you are facilitating their frankly destructive policies. Grow a metaphorical pair and take the jerks on directly, won't you?
Seriously, are you on the side of ideology and dogma or the side of empiricism? Stand up for something! Punish these people!
The lesson here is simple: Whenever you start using your brain you start sounding like a liberal. Conservative publications are not going to welcome you as long as you keep thinking rational thoughts.
Mark E Hoffer,
Are you twelve years old?
Name names. Any bridges you burn were not bridges you would want to be seen on anyway.
The book is obviously Jon Chait's "The Big Con."
Dave is probably right, although the other candidate I thought of was Krugman's book.
Dave: I think so too. Anyone notice if the WSJ has published a review of the Big Con yet?
A search for "Chait" on wsj.com reveals, that, no, they haven't reviewed it yet. My guess is they will have to wait until someone who isn't Megan writes a new review.
Surely the Laffer Curve still applies -- regardless of where we may be on it. And, in the case of corporate taxation, at least, there's pretty good evidence that we might be on the wrong side of the hump.
B,
Not all Economists are positivists. You would do well to aquaint yourself with the "Austrian School". This brief intro by Robert Murphy:
http://www.mises.org/story/1304
should help you fill in the gaps.
Also, Why is it that Chait's book is garnering so much attention?
Pile on this.
Comparing a right wing publication with a party line with an organization consisting of goons that have virtually single-handedly disabled the children of America is hyperbole at best and moronitude at worst.
I read that quote by Ramesh of NRO yesterday, and was struck by the line that another commented quoted above:
"Presumably what they mean is that the top income tax rate is higher than the revenue-maximizing rate, but I'm not sure why they think that it is. Bush's tax cuts appear to have caused revenue to be lower than it would otherwise have been, which suggests that we're already below the revenue-maximizing tax rate."
Uh, what exactly is the basis for the claim that "Bush's tax cuts appear to have caused revenue to be lower than it would otherwise have been"? Everything I've seen - which is that revenues are -vastly- up as a direct result of increasing economic output due to lower taxation - implies the exact opposite, and if anything the last several years and round of tax cuts actively support the Laffer Curve.
That revenues are up sharply after tax cuts is indisputable. Where the heck is this claim that the opposite has been proven coming from?
Qwinn
>>I said that the Laffer Curve didn't apply at American levels of taxation.
What taxes are we talking about here? Corporate rates still appear to be too high.
What makes you think that we should maximize goverment reveue? I'd much rather maximize my DNI and keep the tax man's hands off my wallet.
it violated their editorial line on taxation
1) They could simply have lied to you about the spike's rationale. I was a freelance writer for a while, and I learned editors are (cough) not always honest.
2) A "line on taxation" covers a lot of intellectual real estate....so much that it can be hard to see exactly where one went wrong.
You are seriously arguing that the laffer curve analysis is irrelevant to high income individuals who pay federal, state and local taxes, which combined exceed 50%? And may go higher if Obama's plan to take the caps off Social Security and Medicare goes through?
It's a shame to see a normally enlightened voice go so awry.
I look at this the same as the question is the death penalty a deterrent? Frankly, since it is a question of justice, I don't really care what side of Laffer we are on. At some level, we can all agree that it is immoral for govn't. to take one's possessions, under the threat of force, and give them so someone else. Personally, I believe we are well passed that level.
Sheesh. I thought the point of Mr. Laffer's curve on the napkin was where we were on the curve, not the shape. The shape looks like a garden variety of bell curve to me. I think that drawing curvy sorts of graphs is about 90% of economics.
So, what would have happened if Laffer had said "Yeah, this is the shape, but we are way over here where there is plenty of room to raise revenue by raising rates."? My guess is that most of us would never have heard of Mr. Laffer.
The phrase "the Laffler curve does not apply" is too loosely worded to be true or false. If you actually said it in that way, it is certainly not your best writing.
If you said that tax reciepts will fall somewhat if personal income tax rates are reduced you are perfectly right and an editor who blocks your review because you said it is a dunderhead or is blinded by ideology (the two are sometimes so hard to tell apart).
The valuable insight from the Laffler curve is that receipts will fall by a lower percent than the rate cut due to various dynamic effects including greater work incentive and less incentive for tax avoidance. Thats still true so I can't support a blanket dis of Laffler.
Apetra - High-income wage-earners pay a total tax rate almost precisely equal to low-average income wage earners. It's simply not true that their total tax rate is higher. However, since we're talking about the laffer curve, obviously their marginal tax rates are higher, though nowhere near 50 percent.
And of course you're not talking about people who make their living through investments, where they generally pay a flat 15% rate, far below what I pay, for example, in income taxes.
Qwinn - Revenues are not up, not even slightly, never mind "vastly." What's your source? There is a rightwing meme out there suggesting that when post-cut revenues fall less than some people expect it's an "increase," but it's not. It's a less-dire decrease (dire, assuming spending is not also cut). The Bush administration is trumpeting that the deficit - which every sane economist agrees is larger now than it would be had Bush not cut taxes for the rich - is not as huge as many had predicted. True. But it's still a decrease, and a big one. Ramesh is correct.
The Lafer Curve is something like the price of products in supermarket. You can cut the price of groceries in a supermarket and still raise your profit IF the raise on consumption is enough to cover your costs.
I don't see any evidence to why supply side doesn't work. Where is the enlightened discussion of the substance.
Also, why is it left wingers always charactorize their point of view as smarter and reality based. I doubt I'm open to your point of view if you insist that I'm too stupid to understand your nuance.
We shouldn't let our young men play soccer. That's how we get men like "ken".
I think there may be some factual basis to belive that tax cuts beyond a certain level do restrain the growth of government revenue. Fine. Given the level of waste and fraud, exactly why is that a bad thing? The absolute finest thing about tax cuts )after the proven historical fact that they stimulate the economy in a productive way), is that knucklehead politicians and bureaucrats have less of our money to piddle away than they otherwise would have.
Wouldn't it be a bit more fair to say 'one of the few Conservative outlets said I didn't tow their ideological line... upon which their identity depends'
Would you expect 'The Nation' or 'The New Republic' to publish a book supportive of the arguments regarding the Laffer Curve?
And... allow me to toss in the red-meat... Of course the Laffer curve applies to "American levels of taxation" because it is "American levels of taxation" it attempts to model.
I think they misspoke. They should have said they couldn't accept your review because it's just nonsense.
The Laffer curve is a curve. From 0% to 100%. It applies at all levels and predicts a different result at each one.
If you meant to say that we are at a point on the curve where a tax cut wouldn't lead to increased tax revenue, then that might be right or wrong but it wouldn't be nonsense.
Sigh. I blogged in haste -- and anger -- but the review simply said, as is true, that at American levels of taxation, cutting taxes does not raise revenue.
PaulB -
If your position is that cutting taxes increases revenue, the burden is upon you to come up with some evidence for that, if you can. Megan is correct and has the facts on her side (along with Ramesh). Since you seem to be, perhaps, a bit unfamiliar with the mechanics, the idea is this:
Take an economy. Set the marginal tax rate to zero percent. What's the government's revenue? Nothing.
Then raise taxes to 100%. What's the government's revenue? Well, it's more than zero (see: Soviet Union), but it's still low.
Then, lower taxes to, say, 25%. What's the government's revenue (after markets adjust)? We know from experience (ya know, facts) that it will be higher than under both a zero percent rate and a 100% rate. Now, plot those 3 points on a graph and connect the dots, and it's a curve, with tax rates going from 0-100 percent along the horizontal axis, and tax revenues increasing along the vertical axis.
I wish I could say nobody disputes the self-evident nature of this, but in fact a lot of liberals do dispute it, but they're wrong. The Laffer Curve matches the evidence and makes intuitive sense.
The kicker is in the details. As with any utility curve, the effect of a change in tax rates depends on what your starting point on the curve is. If you're the Soviet Union and you lower taxes, you will certainly increase government revenue (all things being equal). But in practice, in this country, at these rates, tax cuts absolutely, positively, without any doubt at all, do not increase revenues. When the Bush administration says otherwise, it is lying to you.
Look at the Clinton years: Bill Clinton raised marginal income tax rates, and wingers predicted calamity and disaster, and we had a nice little boom throughout he 90s. If anything, there was too much growth, helping feed the tech bubble. To go back to the curve, it's an inverted u-shaped curve, and we're somewhere in the left half, so that as you move left to right along the horizontal axis (increasing taxes), tax revenue increases (vertical axis).
I hope this helped, and I tried not to sound too condescending, although it's hard, because frankly it amazes me that people like you can somehow forget what happened during the entire Clinton adminisration. It's like it didn't happen. An entire decade - poof! - gone. BTW, if you're going to let my bad attitude determine your openness to facts, rather than your need to know facts, that's pretty sad.
Surely the Atlantic Monthly will publish it.
I keed. I keed.
As an international tax planner for a large multinational corporation, it is my strong impression that the Laffer Curve has a lot of curve left on it. Multinationals pay a lot of attention to tax rates in determining what country to invest jobs and capital in. It certainly is not the only factor in a full financial analysis, but it often is the largest variable that one has control over.
But don't most overtly political magazines, such as National Review, typically only publish in line with certain key editorial viewpoints?
M -
I think they probably do. But in this case it's not a matter of opinion, but fact. Megan's article was spiked for containing inconvenient / unwelcome facts, not alien editorial "positions."
DP Moynahan said you're entitled to your own opinion, but not your own facts.
Slippery Pete does a creditable job of explaining the Laffer Curve. That it exists should be obvious; where we happen to be on it now is not.
But Laserlight brings up what for me is a bigger concern: that too much focus on the Curve will plant an unstated assumption that tax policy should be aimed at maximizing government revenue. Nooooo!
Casper - Thank you, but I actually disagree that the Laffer Curve doesn't really imply anything, it just describes what is. However, I'd even go a step further and say that its advocates don't advocate maximizing government revenue as such, but increasing the overall efficiency of the tax system - called pareto efficiency. If you can increase the amount of money people keep after tax and increase government revenue, through a change in tax rates, then the overall system is more efficient - that is, there's less deadweight loss. This is almost always a good thing, even if you think that government is bad (which I do not).
I won't judge the decision to not publish without reading the article, but considering that many people are paying 30% and more in combined taxes, I'd say the statement "at American levels of taxation, cutting taxes does not raise revenue" is at best too simplistic.
And for Slippery Pete who cliamed: Revenues are not up, not even slightly, never mind "vastly."
Please be so kind to review this page and this page and let us know if you've learned anything new today.
Oh and if anyone's wondering, according to the IRS wiki 2006 revenues were over 2.2 trillion. We'll have to wait for refunds to judge 2007 but I haven't seen any reason to think they won't be higher still.
Personally, I learned tax theory in 94 or 95 when I read how Bush Sr.'s 1990 luxury tax helped sink the yacht industry, luxury taxes which Clinton repealed in 93. Seemed rather obvious in retrospect.
The Laffer Curve is ALWAYS 100% correct in theory.
The problem is one can never know where the heck we are on it with the exception of 0% tax and 100% tax.
Pete: Well stated, though I'm not at all sure we can assume we're on the left side of the curve because of one data point (Clinton's tax increases coinciding with that whole "explosive growth of internet commerce and cheap and super-accessible computing" thing.).
(We may well be on the left side of the curve, of course - I'm just saying that since we can't control external factors like the aforementioned, that would almost certainly lead to a massive increase in wealth creation regardless of a tax increase at that time, we can't easily know where we are on the curve from that data point.)
The difficulty here compared to the hard sciences is that we can't run control studies in any sort of sane way; not only because the people in general wouldn't likely stand for it, but because if they know tax rates are temporary and being used to determine that, that raises the spectre of gaming the system, thus distorting the data compared to how people would act knowing that tax rates weren't being used to... determine future tax rates.
Juan:
I'll second that emotion! 98% of what Darwin wrote in The Origen of Species, and 99.9% of The Descent of Man is now (1) known to be false; or (2) so politically incorrect that even Ann Coulter wouldn't dare utter it in public. Liberals who cite their acceptance of Darwinian theory as an indication of their sophistication have never read him.
As for the spiking of the review: well, it's their magazine. They can decide what it says, can't they? Quit griping and publish the review somewhere else. It's not as if America has only one outlet for the expression of thought and opinion.
Anyone interested in arguing which side of the Laffer Curve federal taxes are on would do well to look at the tables in the "Economic Report of the President" http://www.gpoaccess.gov/eop/tables07.html
In particular, the table on Federal receipts by major category ( http://www.gpoaccess.gov/eop/2007/B80.xls ) is interesting, as is the table on Federal receipts and outlays ( http://www.gpoaccess.gov/eop/2007/B78.xls ), since it provides GDP figures for the corresponding period.
Looking at those tables, it took six years for personal income tax receipts and five years for corporate tax receipts to return to their 2000 levels of gross revenue. That would seem to make it tenuous to argue that the tax cuts increased revenue. If you want to take 2001 as the baseline, the it took four and three respectively for receipts in return to pre-tax cut levels. Still not a strong case for the tax cuts causing tax revenue increases in my mind, but others will, I am certain, disagree.
That does not mean that the tax cuts were not worth it. The real annual growth in GDP went from 0.8% in 2001, and increased every year through 2004 (3.9%) ( http://www.gpoaccess.gov/eop/2007/B4.xls ) And anything that let's me keep a greater portion of the money I earn is definitely worth it.
Yes, ABW, I've learned you have difficulty understanding economics. In case I wasn't kindergarten-clear, what I meant is that revenues aren't now higher than they would have been, had a tax cut not passed.
ABW - I'm curious - why do you link to a graph depicting revenue from corporate income taxes?
Also, are you not aware that post-recession rebounding economies always throw off greater income and tax revenue?
If tax rates could be increased without, over time, negatively affecting the behavior of producers, socialism should work. And as tax cuts are believed to be leading to a coming recession, it appears politicians will be testing if 1990s type tax increases will rescue the economy - though it seems doubtful that 1990s type cuts in military expenditures can be made simultaneously - with the savings being spent on other more economically stimulative projects.
Whenever you start using your brain you start sounding like a liberal
What a great way of keeping your self-esteem up!
Megan,
I read through the comments to try to figure out what "I take it all back" is supposed to refer to.
A proposition that there are only partisans on one side of an argument?
-Slippery Pete:
"Qwinn - Revenues are not up, not even slightly, never mind "vastly." What's your source? There is a rightwing meme out there suggesting that when post-cut revenues fall less than some people expect it's an "increase," but it's not. It's a less-dire decrease..."
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=economic_indicators&docid=33ja07.txt
Total Federal receipts in billions of dollars
2003: 1,782.5
2006: 2,407.3
35% increase.
Federal receipts from individual income taxes
2003: 793.7
2006: 1,043.9
31.5% increase
http://www.cbo.gov/ftpdocs/77xx/doc7731/01-24-BudgetOutlook.pdf
Capital gains tax receipts in billions of dollars
2003: 50
2006: 103
106% increase
A key passage from the cited CBO report:
"Although 2007 would be the third consecutive year in which revenues rose faster than gross domestic product, revenue growth would be less than half the rate observed in each of the past two years, when revenues grew at their fastest pace in 25 years. The last time revenues rose that fast was in the early 1980s, when inflation was higher and certain elements of the tax system were not yet indexed for inflation."
The income tax cuts did provide a relatively small boost to economic growth, growing the tax base, but the 2003 tax cuts to investment (capital gains and dividends) has had massive payoffs, both in terms of economic growth and in broadening the tax base to increase revenues.
Keep in mind that the capital gains rate was lowered from 20% to 15%, a *25% reduction* in the rate, and yet capital gains revenues increased 106% in 3 years.
Yes, ABW, I've learned you have difficulty understanding economics. In case I wasn't kindergarten-clear, what I meant is that revenues aren't now higher than they would have been, had a tax cut not passed.
Doesn't this point sort of make the liberal whining about conservatives "lying" about supply-side effects rather weak beer? Conservatives (some of whom might be lying, but most of whom are just misinformed) claim that cutting taxes will spur economic activity & investment, which will lead to increased revenues than lower levels of economic activity. They then claim that the net increase in tax revenue is larger than that lost by the tax cut itself. Liberals throw hissy fits, whining that the revenues aren't higher than they would be without the tax cut - which is true. But the end result is that we get economic growth, and we can still see increasing tax revenue and deficit reduction even after the tax cut. Is it really so important that we could have had even more tax revenue without the tax cut, and had a lower rate of economic growth? Do liberals really think that their economic message will sell that much better if conservatives consistently claimed that tax cuts won't pay for themselves?
slippery pete,
Thanks for the geometry lesson. I have no problem with your facts. I take issue with your conclusion.
I was inquiring why Megan, in her post, had not developed her argument about the curve. Maybe I wasnt so clear on that.
I posit if I paid less in taxes there is a good chance that I would engage that money in the economy in some other way. So explain how that amounts to a zero sum game at any level of taxation.
When I buy a doughnut it benefits the whole production chain for that doughnut. Even Homer knows you can't buy doughnuts if you don't have the money.
Pete, I hope that whole doughnut analogy didn't lose you. It would be a better world if we could have a laffer curve without the math...oh and kill all the lawyers.
Sorry, that quote above was of Qwinn, not Slippery Pete.
Expanding the tax base is a much better way of increasing revenues than increasing the tax rate.
"In case I wasn't kindergarten-clear, what I meant is that revenues aren't now higher than they would have been, had a tax cut not passed."
Nonetheless, it has been proven true that the government does not have to raise taxes in order to increase tax receipts and in time the budget deficit will fall. So why should any politician consider raising taxes?
Every dollar or drachma a government spends has to come from _somewhere_:
taxes (forcibly extracted from taxpayers)
debt (creditors enticed to pay cash for bonds)
printing press (inflation reduces the value of all cash holdings)
The previous possessors of this wealth would have done _something_ with it had the government not drawn it into/through/out of the treasury. Any analysis that applies a virtuous Keynesian multiplier to the effects of the government spending ought logically to be applying a similar, not-so-virtous multiplier to the loss of that "other" use of the wealth.
Somewhere in all that mess there are bound to be benefits from at least some government spending. (See, I'm not _completely_ doctrinaire.) We might not really believe that Government is evil, but given the acquisitive and protective instincts of the humans granted government power, and given the tendency of large government organizations toward deadweight loss, treating the government as if it _were_ evil may still be a useful model.
And keeping taxes down makes it politically a little more difficult to increase government spending, at least in the US. I hope, anyway.
In reviewing revenue figures you have to adjust for inflation. Most of the numbers cited above are in current as opposed to constant dollars. In constant dollars the revenue situation isn't nearly as positive as it is in current dollars. The fact of the matter is that on all levels, job growth, GDP growth, revenue growth, etc., the average annual growth during Bush's term has been worse than during the Clinton years.
"They then claim that the net increase in tax revenue is larger than that lost by the tax cut itself.
Can anyone cite where the Laffer Curve actually makes the case above? While I know some conservatives may make that case; I understood that the Laffer Curve does not.
Brian - Yes, on the right half of the curve (the downward-sloping part), as you increase the marginal tax rate (horizontal axis moving left to right), tax revenues drop. The dishonest thing that supply-side conservatives do is to assume that we're on the downward-sloping side of the curve, when all evidence suggests we're on the upward-sloping side. That's why nothing bad happened when Clinton raised taxes, except perhaps that we had too much growth.
Mike Magnum - Again, your numbers show that revenues increased after the Bush tax breaks, but that's simply beside the point. Nobody said that revenues can't go up; the point is that they don't increase as much as they would have had the tax rate remained higher.
Plus, ya know, 2003 was when we pulled out of the post-tech-boom post-9/11 recession, and these things tend to go up after recessions.
Brian - Politicians raise taxes to pay for stuff. Tax revenue certainly tends to increase over time regardless of whether the rate is 10% or 40% - the point is that revenues are higher at 40% than at 10%.
Thank you, Mike Magnum, for providing the data that shows that I was quite correct about revenues being sharply up.
For the record, here's some more evidence of it, as detailed in the NY Times as far back as 2005.
http://www.nytimes.com/2005/07/13/business/13deficit.html?pagewanted=print
The title of the article: "Sharp rise in tax revenue to Pare US Deficit".
So, Slippery Pete, since you wanted to know where my "meme" came from that revenues were up, I'd like to know where -your- meme came up that they weren't even up "slightly". That works both ways, right?
And I see a huge stepping back on the argument now. From Jim:
"The fact of the matter is that on all levels, job growth, GDP growth, revenue growth, etc., the average annual growth during Bush's term has been worse than during the Clinton years."
Come -on-. Here's a wild theory. Couldn't have been a result of minor things like, oh, a huge tech stock bubble that Clinton happened to receive the benefit of but did nothing to create (unless Gore really did create the Internet) while Bush got the bubble's explosion, or, say, 9/11. I think that if on 9/12 someone predicted how the economy actually did perform over the next 6 years, that person would've been laughed out of the house.
Job growth was better under Clinton? Uh, yeah, well, I guess when the unemployment rate under Bush has been under 5% for several years, there's not much room for additional growth.
Mike Magnum - again, thanks for providing the raw data. Still looking for an answer to my question about where this "revenues not even slightly up" myth came from. As if I couldn't guess.
Qwinn
Wow, Pete, so after telling us that revenues weren't even slightly up, and now being shown that they are indeed sharply up, this makes no difference at all to you? You dismiss it as "beside the point"? If revenues being actually up or down is "beside the point", why'd you respond to my question by chafing at my claim that revenues are in fact up?
You are aptly named, I see.
And I propose that claiming that they aren't up as high as they would've been is 100% speculation. There's no way you could know that. If they'd gone down, okay, fine, it'd be hard to argue that the Laffer curve worked, but since they have in fact gone -sharply- up, you've got to show -why- you think revenue would be higher if taxes hadn't been cut and all the economic stimulus that the tax cuts provided hadn't happened.
It's like you're simply presuming that the economy would've done exactly as well without the tax cuts, and then applying differing tax rates and saying "See? We would've gotten more". This is completely silly. You can't do that. You have no credible way of estimating what the economy would look like if the tax cuts hadn't happened. If you could, you should be the Fed Chairman.
As it stands, with revenues up sharply, all you're proving is that no amount of evidence could possibly confirm the Laffer curve to you. No matter how much tax revenues increase after a tax break, you'll just effectively say "Well, I say they woulda been higher without the tax cuts, so nyah". Please.
Qwinn
Wow, this is getting really funny, Qwinn.
Let's dig right in, shall we?
I read the NY Times link you provided. I mean, did you read that article before you posted the link, or just the headline? I'm seriously asking, because it's inconceivable to me that you actually read the article, which would be in line with expectations, if you know what I mean.
Do you want me to start producing quotes from it, or are you willing to concede you didn't read what it actually said?
-Brian
"Can anyone cite where the Laffer Curve actually makes the case above? While I know some conservatives may make that case; I understood that the Laffer Curve does not."
That depends on 1) the tax rate, and 2) the period of time you are measuring. If the tax rate is high enough, lowering the tax rate will result in an immediate increase in revenues, but that is only true for very high rates (or for moderately high rates on investment). What is more frequently the case is that a reduction of tax rates will stimulate a sustained increase in economic growth that in the long term will increase revenues over what they would have been with no change in the tax rate.
If you reduce the marginal tax rate by 10% (and the average tax rate by about half that) and the economy changes from 3% to 4% long term economic growth as a result, tax revenues can grow to be higher than they would have been without the tax changes, given enough time. It all depends on how much of a growth stimulus the tax changes provide.
Extremely simplified model below:
assuming revenues grow at a 1:1 ratio with GDP growth - they don't...it's a simple model
assuming the reduction in average tax rate is half of the reduction in marginal rate
assuming an initial average tax rate of 15% without the change, and 14.25% with the change
assuming 3% average GDP growth without the change and 4% GDP growth with the change
first year after tax change
GDP: 103% 104%
Revenue: 15.5 14.82
after 5 years
GDP: 116% 122%
Revenue: 17.4 17.4
after 10 years
GDP: 134% 148%
Revenue: 20.1 21.1
That is the theory at least, displayed in a very simplified model. The key question is how much of a stimulus the tax rate cut provides. Income tax cuts seem to provide a modest stimulus and cuts to capital gains and dividends seem to provide a larger stimulus. Of course, that is dependent on the original rate. A capital gains cut from 2% to 1% would probably only result in halving revenues from capital gains taxes and not provide any measurable stimulus, whereas a capital gains cut from 75% to 37.5% would obviously provide a significant stimulus to economic growth. The massive increases in capital gains revenues (and excellent economic growth) over the past few years isn't proof, but it is definitely suggestive.
At least, that is my understanding. I'm sure an actual economist would gnash their teeth at my attempted explanation.
-Slippery Pete
"Mike Magnum - Again, your numbers show that revenues increased after the Bush tax breaks, but that's simply beside the point. Nobody said that revenues can't go up; the point is that they don't increase as much as they would have had the tax rate remained higher."
You seem to think that the economic recovery happened in a vacuum. It did not. The 2003 tax cuts on investment provided a massive economic stimulus that prompted the strong recovery. The recovery would not have been nearly as strong without those tax cuts, and the tax base would not have grown as quickly.
If you assume that tax cuts have no effect on economic growth, then your optimum tax rate is simple: 100%. I think you would quickly find that economic growth is not divorced from the rate of taxation.
While I await your reply, for one last time I'll briefly address this perplexing quandry - increasing revenue following a marginal tax cut rate.
I never argued that tax revenue would go down year on year following a tax cut. What I said was that tax cuts don't pay for themselves - meaning, increases in revenue attributable to economic growth spurred on by tax cuts are not greater than the direct cost of the tax cuts themselves. In other words, the revenue foregone by tax cuts is greater than the extra (tax) revenue generated by increased economic growth.
See, the whole argument offered up by supply-siders is not (merely) that tax revenue can increase in years following marginal tax rate cuts. It is a much more radical argument, that the tax cuts pay for themselves.
If you're imagining that I'm sitting here chagrinned that some hard facts have shown I'm wrong, I'm sorry to disappoint you, but you're mistaken (again). You don't understand what my counterargument is because you don't even understand the supply-side case itself to begin with. You think you've nailed me on an argument I never made, because you're confused and over your head and perhaps because you spend too much time waging partisan battle and too little time learning things.
Yes, I did read it, slippery pete. And I stand by it. There's nothing there that downplays the data other than the NY Times' incapability of doing everything it can to downplay any positive news about Bush, but it's obviously contrived.
I mean, come on, we're dealing with a media that today actually had the balls to bemoan the economic plight of gravediggers in Iraq because they don't have as many bodies to bury now. Do you expect anything different in economic coverage? What's amazing is that revenues were up so much that they actually conceded it at all.
About the only negative point worth making in there was about increased federal spending, but that really has nothing to do with the Laffer Curve.
Other points made in there were analysts saying "it won't last"... except, oops, it did. So feel free to quote them too.
Oh wait, let me guess, you're going to quote this one...
"In addition, while a lot of the increase in tax revenue flows from the improving economy and higher incomes, part of the jump stemmed from a special factor: the expiration of a temporary tax break that allowed companies to write off their investment in new equipment much more rapidly than normal."
Right. So "a lot" of the boost in revenue is precisely because of the Laffer Curve. But "part" of it was for some other reason. Are we told how big a part? No. Could it be inconsequential? Sure. But hey... it's some damn nice downspin that lets you point and say "That article isn't as positive as you claimed", right?
Qwinn
"You think you've nailed me on an argument I never made"
*cough*
Slippery Pete: "Revenues are not up, not even slightly, never mind "vastly."
You did, in fact, make the argument that the tax cuts did not increase revenue at all.
Someone less slippery would indeed feel some chagrin at that.
Qwinn
Oh, and having been so vastly wrong on the facts about the actual revenues we've had since the tax cuts, I think it would befit you to be a little less condescending and arrogant. I mean, to be so utterly wrong on the data and then to actually act -more- arrogant and as if you so -obviously- know more than the rest of us takes some balls, ya know?
Qwinn
Mike -
Well, since the Early 2000s recession ended in November 2001, it'd be quite the trick for Bush's 2003 tax cut to have had much to do with it, eh?
http://www.nber.org/cycles.html
And, really, this has to be the final time I say this. Some people are uneducable.
The argument is NOT whether tax cuts stimulate the economy - they do - but whether they pay for themselves. Please, seriously, try to stop forgetting this.
"Federal revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that," said Alan D. Viard, a former Bush White House economist now at the nonpartisan American Enterprise Institute.
...
An analysis of Treasury data prepared last month by the Congressional Research Service estimates that economic growth fueled by the cuts is likely to generate revenue worth about 7 percent of the total cost of the cuts, a broad package of rate reductions and tax credits that has returned an estimated $1.1 trillion to taxpayers since 2001.
There are two arguments that confuse Qwinn and Mike. They are:
1) Tax cuts stimulate the economy, which then throws of additional tax revenue
2) Tax cuts stimulate the economy so much that the additional tax revenue pays for the cost of the tax cuts
See, guys, these are not the same argument. They are different. The guys on your team understand the difference, but you do not because you actually know less about this subject than the discredited loonies who advance it.
I am doubting whether there's any point in argument this anymore. I can't be any clearer.
Qwinn, you became excited over this part of the Times article:
...a lot of the increase in tax revenue flows from the improving economy and higher incomes....
Now, does this sentence refer to argument 1 or 2 above? The answer is 1. The article states that the revenue in excess of predicted post-tax revenue resulted from increased economic activity. This is almost certainly true. And another way of saying it is that the decline in tax revenue was less than forecast due to higher-than-anticipated economic activity. This supports Argument 1, which nobody disagrees with. Argument 2 - that post-cut revenue increases exceeded the direct cost to tax revenue of the tax cuts - has nothing to do with it.
Now I will concede that my wording about revenue not being slightly up would be confusing to somebody with no training, education, experience, or working knowledge of this subject. I had assumed you realized that the debate was whether tax cuts pay for themselves, and not merely whether post-cut revenue can increase. I was mistaken and I apologize for assuming too much of you.
"Federal revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that," said Alan D. Viard, a former Bush White House economist now at the nonpartisan American Enterprise Institute."
Ah, yes. Just like global warming. "There's really no dispute among" scientists about that, either. Well, except for the 17,000 or so who dispute it.
Sorry, but I've really lost faith in people telling me that there's "no dispute" among supposed authority figures. We got tax cuts. People told us this would lower revenue. In fact, we had pete here telling us it -did- lower revenue. But look at the data, and find out that revenues are in fact sharply up.
And the same person who told us that they weren't up at all is now telling us he feels no chagrin whatsoever for misrepresenting the facts, and in fact simply ramps up his calling us stupid and "uneducable". This same guy is passing himself off as having profound economic knowledge. I should believe in his good faith why? I should believe that other unnamed "economists" who are "not in dispute" are any different?
I believe what I see with my eyes. And what I see is - tax cuts triggered huge increase in tax revenue. You expect you can roll in and basically say, "Well, yes, but if it weren't for the tax cuts the rise in revenue wouldn't have just been huge, it would've been absolutely freaking fantabulously massive".
Seriously. For you guys to be right, it seems to me that the revenue increase over the last few years, after the tech bubble burst and after 9/11, would have to be record setting. Absolutely staggering. And with no prompting at all from tax cuts. It would've just happened all by itself, you're trying to tell me.
Bollocks, I say. And appeals to authority that claim "no dispute" among economists (except, I'm sure, from supply side economists who dispute it but they're considered not credible and so written off out of hand, just like in the global warming debate) don't help your case whatsoever. I believe the numbers.
Qwinn
Qwinn, thanks to your shocking refusal to acknowledge you didn't read the article you linked to until I speculated about it, please don't hold it against me if I quote a few parts of it:
On Wednesday, White House officials plan to announce that the deficit for the 2005 fiscal year, which ends in September, will be far smaller than the $427 billion they estimated in February. Note: The point is that revenue is higher than predicted, not higher than it would have been had the tax cut not been passed.
Most of the increase in individual tax receipts appears to have come from higher stock market gains and the business income of relatively wealthy taxpayers. The biggest jump was not from taxes withheld from salaries but from quarterly payments on investment gains and business earnings, which were up 20 percent this year.
That was similar, though much smaller than a sharp rise in tax revenue during the stock market boom of the late 1990's, which was followed by plunges in revenue when the market bubble burst. And, gosh, I think that stock market boom of the late 1990s followed a substantial tax rate increase.
But many independent analysts cautioned that the improvement, though notable, could prove ephemeral and that it did little to eliminate much bigger fiscal problems just over the horizon. "Lawmakers who allow themselves to be lulled into thinking that the economy is growing its way out of the deficit," wrote Edward McKelvey, an economist at Goldman Sachs in New York, "are unlikely to support the painful measures needed to reach a more lasting solution."
A senior White House official cautioned that it was too early to make definitive judgments about whether the tax cuts had fulfilled the promises of "supply side" economics, a Reagan era concept that posits a direct relationship between lower tax rates and faster economic growth. Here the Times gets it wrong, as any self-respecting supply-sider would be happy to explain. Supply-side doesn't merely predict that tax cuts stimulate growth, but that the growth is so strong as to pay for the cost of the tax cuts.
Critics of Mr. Bush's fiscal policies said the budget outlook seemed good only in comparison with the dire state of affairs a year ago. Given that the recession formally ended nearly four years ago and that overall growth has been quite strong for the last two years, they said, the budget ought to be in much better shape.
1) That an excessive marginal rate will reduce net tax collections is nearly indisputable (the 100% taxation example.)
2) No one (including Art Laffer and Megan McCardle) knows exactly where we are on the Laffer curve.
3) No one can accurately attribute a certain level of GDP growth over a certain time span to a particular tax rate or change thereof. There are too many non-controlled variables.
4) It is quite obvious that some tax rate reductions can result in higher net revenues (see 100% example above). It is not possible to know in advance (or even after the fact) whether a tax cut has 'paid for itself.'
5) Combined federal/state marginal rates are very close to 50% in some states. It is quite reasonable that we could be on the revenue losing side of the Laffer curve.
6) Lower income taxpayers pay a lower average and marginal tax rate than high income taxpayers. By a lot.
7) Current US tax rates are immoral and confiscatory regardless of where we are on the Laffer curve.
BWAHAHAHAHAHA.
Are you KIDDING me?
You're now going to tell me that when I said revenues were up, and you said "Revenues are not even slightly up", you didn't mean "Revenues are not even slightly up", you meant "Revenues are not even slightly up over what they would've been without tax cuts", and then blame -us- for not understanding what you meant implicitly?
Oh, MAN, you really do deserve your name! What a crock of shit.
And yes, pete, I understand the difference you're making very easily. It's not a hard point at all. We "don't get it" only in your mind. But you're trying to weasel out of the fact that you claimed there was no increase in revenue following the tax cuts. Not "increase in revenue other than what we imagine there would've been", but actually said "revenues are not up".
The fact is, even if you meant what you're not claiming you meant, then you were arguing something you can't know. There's no way we can know what the economy would look like without the tax cuts, in fact, predicting how much tax cuts affect revenue -is the argument-, and saying it didn't do enough is effectively starting with the a priori assumption that you were right to begin with.
I base my argument on the fact that revenues were sharply up with the tax cuts, and for you to be right, then tax revenue would've had to have increased by an -astounding- amount with absolutely no economic stimulus at all. It would've... just... happened. Like magic.
You base your argument on the fact that, well, you've imagined what it would be like if the tax cuts hadn't happened, and in that imagination, you turn out to be right. That's about it.
Qwinn
Notice, it's actually the liberals who now rely on the applicability of the elusive Laffer Curve to justify their advocacy of higher taxes, way more more than conservatives ever did to justify theirs of cutting them. Ironically, liberals are the ones who have embraced the most extreme predictions of the theory propounded by the Laffer Curve in order to establish as a minimum criteria that a tax cut "pay for itself" before it can be justified.
So, what does "pay for itself mean"? In the liberal schema, maximization of government revenues, not social welfare, is the objective of public policy. Thus, in order for a tax cut to be "justified," the government's revenue take not only has to increase after the tax rate cut, but that increase must be as much, if not more, than if the old tax rates were applied to the new level of economic activity occurring after the stimulative effect of the tax cut.
Indeed, if the criterion was revenues simply exceeding existing levels, wouldn't the Bush tax cuts have to be adjudged a success?
Qwinn and Mike Magnum, use yourselves as an example. If you got, say, a 5% reduction in your top marginal income tax rate, tell me:
1) At your current taxable income, how much less money would you pay to the government in income taxes?
2) At the new lower marginal rate, what would your annual taxable income have to be to pay MORE in income taxes than you did previously?
3) Is there a snowball's chance of you having that much more income as a result of a slightly lower marginal tax rate?
Ah, of course. You're a climate denialist, too. You probably don't believe in evolution, either, or heliocentrism. The vast majority of astronomers believe in heliocentrism - this is just an argument from authority!
And, btw, the 17,000 number is completely false.
When I began posting here a while ago, I thought it would be a fun but brief discussion among serious people who saw things differently, but I've walked into the swamp with a total fruitcake conspiracy theorist.
Qwinn, I can tell you resent that there are people who are smarter than you, and who tell you what to believe. This rubs you the wrong way. It's unfair, even, how they cram their facts down your throat, and talk down to you and tell you you're wrong about the climate, or economics, or biology, or other facts.
I'll let you in on a secret. I'm not an economist. I'm not a biologist. I've never personally seen the earth go around the sun. I am not an authority figure of any kind. But I believe I possess pretty good judgment, and I generally trust people who have proven they know what they're talking about. I trust science, for the most part. I understand how it works. I understand peer review. It works, and I recognize that.
You, by contrast, possess incredibly poor judgment. Like me, you are no expert, but you haven't sense enough to trust your betters. With a wave of your hand you dismiss thousands of scholarly articles as a conspiracy ginned up by libruls in the media, at universities, at think tanks and research institutes. You have no credentials at all of your own, but you feel qualified to dismiss the hard work of others without even understanding what they're doing or how their knowledge-producing efforts work.
You have proven to me today that you don't understand the difference between tax cuts that cost less than expected and tax cuts that cost nothing. It's a very simple argument, and I've fruitlessly repeated it like 17 times, you there's no evidence that you've internalized any of it. It's like I never said it at all. The ignorance and poor judgment are staggering.
I posted another reply, but the comment is being held up for review by Megan, it seems. *shrug*
Maybe this one will go through.
Again - your claim that we don't get the premise of the Laffer curve, argument, about how they actually pay for themselves is simply wrong. I get it, pete, I really do. Always have. It doesn't change the fact that you argued that revenues weren't up at all.
And now you try to claim it's because we didn't understand your magnificent intellect. *lol*
In today's historical revision by slippery pete:
Qwinn says revenues are sharply up. He doesn't say anything about compared to what they would've been - because that's the entire argument and it's based on speculation, and you can pretty much predict how everyone's going to come down on that question. No, he asked about the hard data. Are revenues sharply up since the tax cuts. Someone with an ounce of honesty would agree that that is relevant. It certainly would've been considered relevant if revenues were -actually down-, wouldn't they?
Pete says revenues aren't up at all. But what he tells us now is that he -really- meant that they're not up more than they would've been - something that he can only claim by assuming that he was right to begin with, unless he's got a magical alternate reality generator that lets him see what the economy would've been like without tax cuts. But for real, that's what he meant. Seriesly. It legitimately never occurred to him that when I said "revenues are sharply up since the tax cuts", I would've meant exactly what I said. And he of course knew that revenues were sharply up, cause he's that kind of a smart guy, but assumed that I must have meant something actively different than what I said. Of course, what I -actually said- was correct. What he interpreted me to have said was a "right wing meme" and wrong. Faced with those two possibilities, he picks the latter. And why? Because he's -just- that much smarter than we are-.
Do you really believe your own BS?
Qwinn
For a good discussion of these issues and to provide some context, you might want to check out Jon Chait's "The Big Con", if only to know what arguments to take exception to.
The context of this entire discussion that I'm not sure everyone is aware of is that Megan's initial reaction to Chait's book was to deny that conservatives took the position Chait attributed to them, which was that tax cuts will pay for themselves.
The rejection of her review on what seem to be purely ideological grounds seems to confirm Chait's original characterization, which why she's now writing "I take it all back."
BTW, you can discount the phenomenal economy of the post tax-increase 90s by claiming it's because the stock market did this or the tech bubble did the other thing. That's fine. But what's sauce for the goose. . . . You must also concede then that growth in post-tax cut 80s may also have been due to other factors unrelated to fiscal policy.
Chait's point is that the relatively small adjustments to marginal income tax rates (28-39%) we've seen in the past 2 decades simply do not play a big role in aggregate economic growth. Whatever effect it has is dwarfed by other macroeconomic events. He concedes that the 70% marginal rate of an earlier time was a bad idea. But the growth of the 90s pretty much disproves that a 39% tax rate is a sufficient disincentive to negatively effect risk-taking and entrepreneurship.
However, these adjustments to tax policy do directly effect the ability of the government to pay its bills. If the economy is so strong now, why are we still running a deficit??? We should run deficits when the economy is weak and surpluses when it is strong, but these large tax cuts--first Reagan's and now Bush's--pretty much ensure perpetual deficits regardless of the state of the economy. The reflexive response that we just need to cut spending to match the reduced revenue these cuts produce has been conclusively undermined by the historical record, which has shown that this is both politically impossible and socially undesirable.
Let's just get back to "kill all the lawyers". Everyone can agree on that, I'm sure.
Qwinn-
You seem awfully hung up on this concept that "revenues are up", although I'm not entirely sure what frame of reference you are giving to the claim.
I mean, let's say a business had increasing revenues from 1996 to 2005, with $500,000 in 1996 topping out at $1 million in revenues for 2005. Then, in 2006, the business only had $100,000 in revenue - it's worst year in over a decade. When the figures coming in for 2007 show that revenues are $300,000, are you going to send out a press release trumpeting that "revenues have risen sharply - by 200% - our biggest growth in a decade"? Or would that seem perhaps a bit disingenuous?
Wow... There are some pretty strange comments here. But the "it's their magazine, they can publish what they want" is the strangest of all.
It starts with a dismissal of Darwinism as "99% wrong," then asserts that there's nothing to argue about because the decision to publish is a private one.
How very pomo of you!
Isn't it just a bit more important whether the original statement for which they refused to published is, you know, true or not?
When people accuse conservatism of intellectual bankruptcy, this is exactly the attitude they are talking about. (And yes, pomo is the same disease, but generally showing liberal symptoms.)
For the record: yes, 35% marginal taxation is to the left of the Laffer maximum. (So is 50%, since Reagan's tax cuts led to an immediate surge in government deficit. Even I agree with Saint Ronnie that 90% is not...)
There are good arguments against 50% marginal taxation, but the Laffer curve is not one of them.
Qwinn, what do you think government economists do? You haven't the foggiest idea, have you? They do scenario analysis, trying to figure out how much money the government will make under different tax scenarios. They do this largely by assuming varying tax rates in the past, determining how much money the government would have made, and projecting into the future.
You really didn't know this, did you? Ah, poor thing. Jeez. It's like there's this whole, big world out there and you don't even realize it.
I actually am an economist, for whatever that's worth. You have no way of knowing which side of the Laffer curve we're on. The fact that net revenues declined in a given year neither proves nor disproves which side of the curve we were on prior to the Reagan tax cuts. The primary driver of revenues is economic growth, which is affected by a multitude of variables of which tax policy is merely one.
There is no question that deficits can be reduced or eliminated by spending less money. There is considerable question as to whether a particular tax rate change will result in lower or higher revenue over either a short or long time horizon. Therefore those who are interested in a fiscal balance should look first, last and always at spending. For any level of revenue, balance can be achieved by spending no more than that amount.
Put another way, government has total control over expenditure. It has only tenuous control over revenue.
Yes, I do realize that, slippery pete. Can you be any more insufferably arrogant?
Of course, economics isn't really a hard science when it comes to the details, is it? It's rather like climatology. Certain sweeping trends can be adduced to be true from observation, but the number of factors is so staggeringly large that it's nearly impossible to predict anything with reasonable certainty. This goes to your absurd strawman implications that because I doubt global warming I must therefore not believe evolution or heliocentricity. But I'm glad you brought up that last one - cause, you know, at one time, "no one disputed" that the sun revolved around the Earth. And when some people started to doubt it, they were told to "mind their betters" too.
At any rate, as far as global warming goes, tell it to the judge in Britain who decided that, as a point of law, British schoolteachers that show An Inconvenient Truth to students must point out 9 massive fallacies promulgated by that film - fallacies that Gore assured us were "beyond dispute" too.
Now, let's get back to the point at hand:
As I have explained numerous times, for you to be right, then if taxes had not been cut, current tax revenue would have to be -way way way- beyond "sharply up" anyawy. They'd have to be astronomical right now. And this would've happened magically, without any tax cuts to incentivize growth. They've already been "up sharply" for several years in reality, but in your little alternate reality, they would've gone WAY WAY WAY up. You don't tell us why this would've been. You don't even need to suggest what causes this to happen. It just happens. Magically. With no tax cuts to kickstart the economy or anything. We just have to take it on faith that tax cuts created sharply higher revenues, but if there weren't tax cuts, they would've been astronomically higher. I mean, that AEI guy claims that the tax cuts only paid for 7% of the revenue lost in tax cuts, right? By how much would tax revenues have had to increase, all by themselves, without any sort of economic impetus such as tax cuts, for that to be true? What would the NY Times article have had to say then? "Tax revenues break all records, economists mystified"?
Sorry. You're going to have to do better than that.
Qwinn
-Slippery Pete
"Well, since the Early 2000s recession ended in November 2001, it'd be quite the trick for Bush's 2003 tax cut to have had much to do with it, eh?"
Yes, the recession did end in 2001, barely. There was a period of very poor economic growth afterwards (1.6% gdp growth in 2002) that improved dramatically immediately after the cap gains cuts in May of 2003.
Here is a quarter after list of GDP growth rates:
2000, 3Q: -0.5
2000, 4Q: 2.1
2001, 1Q: -0.5
2001, 2Q: 1.2
2001, 3Q: -1.4
2001, 4Q: 1.6
2002, 1Q: 2.7
2002, 2Q: 2.2
2002, 3Q: 2.4
2002, 4Q: 0.2
2003, 1Q: 1.2
2003, 2Q: 3.5 - tax cuts early in this period -
2003, 3Q: 7.5
2003, 4Q: 2.7
2004, 1Q: 3.0
2004, 2Q: 3.5
2004, 3Q: 3.6
2004, 4Q: 2.5
2005, 1Q: 3.1
2005, 2Q: 2.8
2005, 3Q: 4.5
2005, 4Q: 1.2 - economic effect of hurricane Katrina -
The slowest growing quarters in the period following the cut (barring the effect of Katrina on 4Q, 2005) were barely slower than the fastest growing quarter in the post recovery period before the cut.
I'm not claiming this is a proof, but it is very suggestive, especially when considering the effect of other major historical tax cuts, such as the Reagan and Kennedy cuts. I distinctly remember the massive explosion of corporate investment immediately following the cut, as illustrated by the 7.5% growth rate in 3Q, 2003.
-Slippery Pete
"1) Tax cuts stimulate the economy, which then throws of additional tax revenue
2) Tax cuts stimulate the economy so much that the additional tax revenue pays for the cost of the tax cuts"
...
"The argument is NOT whether tax cuts stimulate the economy - they do - but whether they pay for themselves. Please, seriously, try to stop forgetting this."
I'm not forgetting it. If you had read more closely, you would have noticed that I've said that sometimes a tax cut can pay for itself assuming that the economic stimulus it provides is large enough. I'm reading what you are saying, but it apparently isn't reciprocal. Tax cuts do not always pay for themselves, or even usually pay for themselves, and that is not the argument I've made. Your argument is that they never pay for themselves, which I dispute.
A 25% reduction in the rate of the cap gains tax resulted in a 106% increase in the revenues brought in by that specific tax in 3 years, not counting the increases it brought to revenues from personal and corporate income taxes. Your argument that revenues from the cap gains tax would have increased more if there had been no cap gains cut is risible, even moreso if your claim is that total revenue increases would have been greater.
In 2003, cap gains brought in 50 billion dollars, while total revenues were 1,782.5 billion dollars. Even if cutting the cap gains rate resulted in a linear reduction in revenues from the cap gains tax, it would still likely increase total revenues by more than the loss of revenues from the cap gains tax itself. (50 billion * 0.25) subtracted from (1,782.5 billion * 0.008) is a postive number. In other words, if cutting the cap gains tax by 25% provides enough economic stimulus to increase revenues from all taxes by 0.8%, it has paid for itself. And that is assuming reductions in the cap gains rate produces linear reductions in revenues from the cap gains tax, which is demonstrably not the case.
I hope I'm not demonstrating how "uneducable" I am.
Ah, the argument from incredulity, the preferred refuge of tiny brains.
So, Qwinn, you've been reduced to this truly pathetic argument: "Government revenue could not possibly be any higher than it is right now, therefore the tax cuts paid for themselves."
Bizarre.
Tom,
Thanks for the additional info. I certainly have heard some conservative politicians (and commentariat) make that claim at times, though I don't think it is universal to all conservatives or all the time.
I would have to agree with points 1-4 from Dark Helmet, mostly with the unknowableness(the word was fun to type, give me a break).
I am surprised that it looks like no one has appeared to try to quantify the sorts of variables that might affect it. OTOH, just trying to work out the difference in return between private spending and public spending might take literally forever and end up telling nothing.
And by the way, Heliocentrism has been out of favor for a long time. There's a big universe out there. Sol is not in the middle of it. Neither does the Earth "go around" the Sun. Those two objects trace a complicated wobbly path the net effect of which is to place Earth sometimes in a 'forward' position relative to their joint translation through space, somtimes in a 'rear' position, and sometimes in various 'side' positions at regular, fairly smooth intervals. This is also true of the Moon-Earth pattern of movement. It creates the appearance of what we commonly think of as an elliptical orbit.
So, Mike, you're seriously staking out the position that a tax cut bill passed in March of 2003 impacted the economic performance of Q3 of 2003. Wow, that's some quick work in a 10 trillion dollar economy. Amazing.
Just curious, what tax increases were passed in Q4, 2003? I mean, there was this staggering 4.8 percent drop in growth from Q3 2003 to Q4 2003 - known worldwide as the infamous "Black Q3-Q4 2003". Since we're attributing every little up and down to tax policy, please tell me what tax policy changes account for that one.
Also, do you dispute that the economy grew faster and longer after the Clinton tax increases?
And: Hurricane Katrina was estimated to have impacted nation-wide economic growth 0.5-1.0 percent. The total GDP of Lousiana and Mississippi accounts for 2% of national GDP. You could, in otherwords, raze the two states to the ground and still couldn't attribute a 3.3% drop in growth to it. And yet, above, you attribute yet another blip on the line to a single event.
You're above your head, junior.
Mike - You're right. Your math is correct...if you attribute every single dollar of growth in capital gains tax revenue to the tax cut. Is that really a hill you want to try to defend now?
For the record, the first phase of Bush tax cut was passed in 2001. TO be clear, I would not attribute the subsequent recovery solely to a change in tax policy, though it probably helped.
As a side note, it is interesting how the fans of the Clinton tax increase never attribute any of the good '90s economy to the tax increase signed by Bush the Elder before Clinton ever came to office. Neither do they give Bush the Elder any credit for 'reducing the deficit'.
The reality is economic cycles come and go. Revenues follow growth. Tax policy is a sometimes minor sometimes major factor in impeding or enhancing economic growth.
None of this answers the question of where we are on the Laffer curve right now. I repeat that the question cannot be answered with any degree of certainty.
"At any rate, as far as global warming goes, tell it to the judge in Britain who decided that, as a point of law, British schoolteachers that show An Inconvenient Truth to students must point out 9 massive fallacies promulgated by that film - fallacies that Gore assured us were "beyond dispute" too."
Those dang activist judges!
Qwinn it's pretty simple really. The supply side argument is that tax cuts "pay for themselves." They don't in any way shape or form pay for themselves. Sometime they spur growth so that they cost less. It's really pretty simple.
The 90s are perfect contra example. Marginal rates were higher and by every single measure (job creation, salary, GDP growth) the economy was better.
Well, it is raise revenues or cut spending. For all the comments about how evil it is for the government to take your money, I'm not seeing as much of a complaint about the 5 billion a month we are spending in Iraq, etc. We can't indefinitely borrow money from China. Starving the beast has been completely ineffective.
Actually, the primary tell of whether or not a debate opponent is susceptible to reason is if they are willing to concede points that have been successfully rebutted. The adolescent thinker concedes NOTHING, EVER, regardless of whether the point in question speaks to their larger argument or not. A grown-up, on the other hand, does not insist on fighting to the death over every little point. If their argument is credible in the first place, it won't depend on a single point and the grown-up recognizes this, and concedes in good faith to a successful rebuttal.
Slippery Pete, so far you've demonstrated in this thread exactly which perspective you are coming from. Either concede your statement about revenue growth or get off the pot.
yours/
peter.
Oh, Peter, come on. I concede nothing here, although I'm wrong all the time. I voted for George Bush in 2000, for chrissake. Believe me, I concede, I concede.
But on the other point, no. I do not. Not really. Perhaps I could have been clearer, but anybody who knows the first thing about supply-side arguments knows perfectly well what I meant. If you seriously think my argument was that tax revenues must always decline after tax cuts, it makes you look foolish, not me. When I said that tax revenues did not increase, it was perfectly clear that I meant they did not recover and/or exceed their cost. I mean to say, that's the WHOLE supply-side point. There is not other point of argument other than that, so what else possibly could I be referring to?
Again, if you're confused, it's because you don't understand what this argument is about. And, well, that's your problem, not mine.
BD,
"The 90s are perfect contra example. Marginal rates were higher and by every single measure (job creation, salary, GDP growth) the economy was better."
"by every single measure": even total indebtedness, Gov., Bus., Pers. was Lower, too!~ Yeah, as if.
Um, running a government deficit should have essentially the same long-term negative impact on economic growth as keeping taxes somewhat higher and paying bills as you go.
Of course, there is another way to balance a budget, and that is to print more money. The bushies have done that too, with the result that the dollar has devalued by more than a factor of two in 7 years.
We are now effectively buying oil in Euros. It is not inconceivable that the government is forced to make T-bills payable in Euros, at which point the US will officially be a 3rd-world economy.
First, when has the government lowered tax rates and taken in less in income? So long as total revenue increases when tax rates are lowered, we are on the "top edge" of the Laffer curve.
Remember, state, federal and local taxes take half your income.
Everything you buy is from someone from whom the government taxes half his income, so their prices are at least twice what they have to be.
Government regulations forbid efficient behavior, doubling the cost of production.
If you make 100,000 dollars a year, you only live on about 12,500 dollars a year.
Now remember that as much productivity gain as we produce, the government tries to inflate the currency to keep their package of goods and services at the same price, then calls that "Zero Inflation". The government actually inflates beyond that. The government gets to spend the inflated money first.
Lowering the US tax rates would increase my quality of life. I would also be able to buy better tools, and work more productively if I paid less in taxes, and was less regulated. My greater productivity would provide greater incentives to work more. Further, I could invest some money to further improve the quality of my life in the future.
Though you may seek to optimize government revenue, I suggest a better goal would be to optimize citizen quality of life.
"Of course, there is another way to balance a budget, and that is to print more money. The bushies have done that too, with the result that the dollar has devalued by more than a factor of two in 7 years."
No, WE have done that, by buying inexpensive goods from China, the Phillipines, Vietnam, etc. Barring foreign investment to make up the difference and bring those dollars back into the economy, a weaker currency is the result of a sustained trade deficit. If the dollar is strong, it increases our ability to import goods, and increases the attractiveness of doing so relative to purchasing domestic goods. If the dollar is weak, the exact opposite is true.
So yes, if the dollar is strong, it makes it cheaper to import oil, but it also makes it cheaper to import Bratz dolls from China.
If the dollar was devalued because someone was printing money hand over fist, we would be experiencing massive inflation. We merely have a currency exchange imbalance.
Where do people get their claim that taxes take up 50% of income? Tax freedom day for 2007 was April 30, which corresponds to a tax rate of 33%.
The 50% number is either really old or really bogus, or both.
I was curious about the conflicting claims as to whether the tax cuts had produced "vastly" or "not even slightly" increased revenue.
Mike Mangum kindly provided this link:
http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=economic_indicators&docid=33ja07.txt
Comparing 2007 revenue to 2000 (the last time that we went 7 years without surpassing the previous high was in 1936), it seems reasonable that, had there been no change in tax rates, we would have passed that mark by now. 2000 revenue was $2025.5B, inflation adjusted that's $2451.9B. 2007, estimated, is $2540.1B. That's an increase of $88B or 3.6%. Of course, the population has also increased by 6.7% over the same period.
If we continue that trend, then over the next 70 years the population will double, but tax revenue will only increase by 47%. And the national debt will be.... I'm sorry, my calculator just blew up.
"NEW YORK (CNNMoney.com) -- Americans this year will have earned enough to pay off all their taxes at the federal, state and local levels by April 30, assuming a 7-day workweek, according to estimates by the Tax Foundation."
assuming a 7-day workweek
Dude, you're talking about Tax Slavery day.
http://money.cnn.com/2007/03/27/pf/taxes/tax_freedom_statelist/index.htm
Lucky serfs in CT need only work 140 days to pay off their indentures.
140/5=28 FYI
Here's a pretty interesting take on the do-tax-cuts-increase-revenue debate:
http://corner.nationalreview.com/post/?q=ZjI2NjhlMjBjZjAzMDk0N2EyNjE4ZjIxZmExMDg4NDk=
From today, no less!
Your statement that "the Laffer curve doesn't apply ..." doesn't make any sense.
Every tax has a Laffer curve. The question is: what does at look like and at which point on the curve are we? So perhaps you really meant to say "The tax system in the US puts us on the left hand side of the peak of the Laffer curve."
In any event, even if true, it is not a particularly interesting claim. Who cares whether government gets more or less revenue? The relevant question is what is the deadweight cost of taxation. That cost always falls when you reduce income taxes, irrespective of where you are on the Laffer curve and irrespective of whether revenue rises or falls.
The fact that revenue may rise or fall is neither here nor there.
April 30 is just 32.7% of the way through a 365 day year. It has nothing to do with a 7-day work week.
From the tax freedom site:
How Tax Freedom Day is Calculated
Tax Freedom Day answers the basic question, "What price is the nation paying for government?" We divide the most authoritative figure for total tax collections by the most authoritative figure for the nation's income. The answer this year is that taxes will amount to 32.7 percent of our income. We convert that percentage into days worked, and if we started on January 1, it would take until April 30. That's when we could start keeping some of our earnings. Income and tax data are then parsed out to the states, yielding 50 state-specific Tax Freedom Days.
A conservative publication, which I will not name
Why not name it?
Dark Helmet nails it. I'm not going to spell out my credentials and argue from authority on the Web, but those of us who deal with this stuff regularly laugh at people who tell you they know what will happen if we raise or lower rates.
You don't know and neither does anybody else. You can't point to where we are on the Curve and neither can I. The Curve is real, it's great theory and it's pretty much useless for planning.
Take away two facts from this discussion: Spending is all we can control. Got a problem with deficits? Only one way to be certain to fix it.
And even though we can't know if cutting or raising taxes is going to increase or decrease long-term receipts, we do know that lowering or raising taxes will put more or less money in the pockets of working people. Legislate with this in mind.
Slippery Pete, you are making a fool of your self to win an argument you lost long ago.
Sponge - That's a clever way of arguing from authority without getting blamed for it. Clever.
The best analysis to date estimates that 7% of the direct cost of Bush's tax cuts was recovered through cut-spurred growth. Maybe it's 0%, maybe it's 40%, but it's not 100%, and if you think it might be, you're a fool, not me. No estimate is anywhere near 100%. You show me a credible estimate that says otherwise, Sponge, and I'll eat these words. Until then, glass houses, my not-arguing-from-authority-but-I-could-if-I-wanted friend.
The "best analysis" is merely a guess. It is not possible to answer the question. Generating such a figure is a waste of time. A 7% estimate is no more meaningful than a 70% or 170% estimate. There is no control case to judge against. There is no way to know what the path of growth would have been in the absence of tax cuts. We cannot even measure last year's GDP growth accurately, let alone come up with a meaningful estimate of what GDP growth would have been with a different tax regime in place.
As for supply side theory, its proponents argue that changing marginal tax rates affects economic growth because people respond to incentives. This is fairly self evident. The contra case - that people DO NOT respond to incentives - is refuted every day around the world.
The main point of supply side theory is that healthy economic growth can best be promoted by incentivizing the supply side of the economy, that is work, savings, investment and production. This is as opposed to Keynsian 'demand-side' theory which holds that the best way to promote healthy economic growth is to incentivize demand, i.e. consumption.
Supply siders believe that desire to consume is rarely a limiting factor, and will generally take care of itself. It is in some sense an extension of Say's Law which is generally paraphrased as 'supply creates its own demand.' A more accurate statement would be "nothing can be consumed which has not first been produced." A fairly self evident observation.
In a nutshell, our standard of living is limited by how much we can produce in goods and services. The willingness to consume is everpresent, and the means to consume is created by the very act of production.
All the argument about whether tax cuts 'pay for themselves' is political rubbish. Both sides are guilty of spinning it to support their policy preferences.
"10.Free education for all children in public schools. Abolition of children's factory labor in its present form. Combination of education with industrial production, etc."
So, does the guy who's comparing the communist manifesto to the Democratic Party platform really believe that we should still have child labor? I mean, I know libertarians are kind of nutty, but I didn't know they were out and out evil...
Once again I cannot add much to Dark Helmet's response. You like that 7% number because it appeals to your biases. You say that's the "best analysis". But I can tell from the quality of your posts that you have no idea what data that number is taken from and no basis to evaluate its credibility if you did. This is the price you pay for losing an argument badly on the Web--virtually nobody will credit you with enough intellectual discipline to accept even the smallest of your assumptions.
The best way to tell if cutting taxes has a beneficial effect upon the economy is looking at the long term effects. And when you do that, a lot of other variables come into play. Err on the side of letting people keep their money.
FOLKS!! LESS TALK, MORE ACTION !!
LET'S TRY TO IDENTIFY THE PUBLICATION BY PROCESS OF ELIMINATION !!
Let's email the editors of conservative publications asking if their publication is the one. If we get denials from all but one, we'll have a pretty good guess as to which it was. I've written to National Review, The Weekly Standard, The American Spectator, and WSJ. Who am I leaving out?
I encourage everyone to write to the above publications and others inquiring on this matter, and post results here on this thread.
And if, for some reason, Megan doesn't allow posting our results here, email your results to me at Brooksbud@aol.com
A post from Mankiw's blog makes the point that tax rate cuts don't have to be "self-financing" to be justified. That's why I said outside of a few supply siders, now it's liberal opponents of tax cuts who most stubbornly invoke the Laffer curve to impose the strict criteria that tax rate cuts "pay for themselves".
http://gregmankiw.blogspot.com/2007/07/on-charlatons-and-cranks.html
Mankiw:
"[My text] book made clear that the critique applied to a particular reason to favor the tax cuts, not necessarily to the policy of cutting taxes. There are many reasons a person might favor tax cuts besides the belief that tax cuts are self-financing. I hope it is not too pedantic to point out that there is a big difference between rejecting a policy and rejecting one argument made by some proponents of the policy."
As to Mankiw's estimate of dynamic scoring:
"In a paper on dynamic scoring, written while I was working at the White House, Matthew Weinzierl and I estimated that a broad-based income tax cut (applying to both capital and labor income) would recoup only about a quarter of the lost revenue through supply-side growth effects. For a cut in capital income taxes, the feedback is larger--about 50 percent--but still well under 100 percent. A chapter on dynamic scoring in the 2004 Economic Report of the President says about the the same thing."
In some circumstances, tax cuts do stimulate the economy. Does anyone here understand that infrastructure stimulates the economy? The alleged benefits of tax cuts pale before the real and measurable benefits of all the humble services we take for granted: trash collection, running water, safe food, standard measures, our highway system, the internet, airports, bridges that don't collapse, weather reports, emergency services, rule of law, stable currency... OH... We may need to kiss off a few of those.
Current Republican economic policy increased revenue as measured by Republican inflated currency. For a spectacular "increase" try measuring US revenue in Afghan or Iraqi currency. In real terms, revenue has declined (unless you want to concede that a bunch of foreigners with socialist sympathies, including the French, have doubled the value of their so-called euro currency in real terms, which is utterly inconceivable and much ignored, and should be, particularly in so far as it has proven true). The worse the inflation, the better the economy, if only you choose sufficiently stupid criteria.
Returning on the weekend, and discovering that future posts took account of at least these two basic and obvious points, would please me almost as much as it would surprise me. Till then, answering individual posts seems pointless.
edh,
I'm a fiscal conservative -- a TRUE fiscal conservative -- which is why I think the Bush tax cuts were bad policy and extending them would be even worse policy. TRUE fiscal conservatism means basing policy on sound assumptions (rather than wishful thinking) and setting responsible fiscal policy in light of current and likely future expenses.
Our enormous unfunded entitlements liabilities combined with the projected deterioration in the worker-to-retiree ratio and our current debt-to-GDP ratio mean that, to avoid a fiscal meltdown in a couple of decades, we are going to need a combination of very substantial cuts in entitlement eligibility and benefits, cuts in discretionary spending and some degree of tax increases. And the longer we wait to address this huge fiscal imbalance, the greater the ultimate pain will be on both the spending and the taxation sides (economists of all stripes are in full agreement on that point). I would like to see most of the solution come from the spending side, but the only way we can have a good sense of how much we need to cut and how much we need to raise taxes is if we are realistic about the relationship between tax rates and revenues, and therefore it's important that we kill the extreme supply-side myth that extending the Bush tax cuts would result in more revenues, or come anywhere close to breaking even.
I don't hear opponents to tax cuts -- liberal or otherwise -- typically claiming that a tax cut need be fully self-financing to be a good idea, so that seems to be a bit of a straw man on your part. But given our unfunded liabilities and current debt, if the revenue feedback effects from a tax cut amounts to only somewhere between 10% and 30% or even a bit higher (as may -- may -- be the case for cap gains tax rates), it means we are sinking deeper into the hole, which is probably not a good idea.
In my humble opinion, anyone who favors extending all or most of the Bush tax cuts is either poorly informed or is no fiscal conservative.
I quote bbbeard:
'Either the Laffer curve is a useful model, or it is not. We may be on the short side or the long side of the hump, but to say "it doesn't apply" is to say "it is not a valid model" -- ostensibly at ANY level of taxation. If you meant to say what Ponnuru said, that we are currently at a level of taxation lower than the [short-term] revenue-maximizing rate, then you should have said that. But you didn't. You said, "it didn't apply".
If I were an editor and I couldn't get a reviewer to understand this very basic point, I would be motivated to deep-six the review also, not out of concern for political correctness, but out of concern for the intellectual quality of the publication.
Equally obvious is that some of your commenters cannot tell the difference between "being at a level of taxation lower than the revenue-maximizing rate" and "the Laffer curve is garbage". That this confusion exists makes it all the more important to make the distinction.
Aside: And for the record, NRO does not have a discernable editorial stance in favor or opposed to the theory of evolution. Look at the columns of John Derbyshire, for example. If anything, NR is influenced heavily by Catholic teachings, and the Church has long come down on Darwin's side of the debate. To say otherwise is to betray a telling lack of knowledge.'
Where to start? As you say, either the Laffer Curve is a useful model or it is not. This is distinct from its being a correct model in some unimportant way. The Laffer Curve is such a model, describing something that happens at the theoretically (or, as the case may be, historically) extreme tax rates. And it is technically just untrue as well. One of the premises always explained is that at a tax rate of 100%, government revenue would be zero. Had Laffer heard of Soviet Russia (a land of public ownership and, yes, a 100% tax rate) or communism in general? Why was he so quantitative that he was blind to the centrality of creativity in our everyday lives? So perhaps we might say it doesn't apply at this rate, which most people who aren't semantics snobs mean to indicate an absence of the associated effect of the model. This is not an argument; its a sneer of vacuous pretense.
What a nice contrast this forms with the last paragraph. Sure, the frame is still cloyingly pedantic, presenting itself as a correction. A pedantic correction in favor of lax judgement of National Review for actually not having a line on evolution and publishing the works of John Derbyshire, entirely understandable given the magazine's intense Catholicism. So while Meg's review should have been canned for semantic reasons (NR's got some real intellectual standards, you see), we mustn't distort National Review's record on the small question of how the natural world came into existence. You see, they're too cowardly to express an opinion there. Do you ask me to judge this the intellectual standards of Catholicism, or conservatism, or some corrupt third element (why not an anti-supply side heresy?)?
Robert (Geilfuss),
I don't think Megan said in her review that the Laffer Curve "didn't apply" in a general sense, nor, apparently, did she use that language. Per her clarification here, the review simply said, as is true, that at American levels of taxation, cutting taxes does not raise revenue
There are masses of studies that show that tax cuts in the US don't bring in the lost revenue. Thus in the context of the US economy the Laffer curve is bunk. What perhaps surprising is that Ms McArdle is surprised at the level of intellectual dishonesty at a leading conservative publication. These folks aren't interested in truth, justice, reality or empirical evidence. That's been apparent for long time. It's part of the reason why the Republican party is becoming increasingly disconnected from mainstream America and why the political price over the next few years is going to be very high.
From what you say ("it couldn't be published because it violated their editorial line on taxation"), it isn't clear why you think your editorial was spiked because you "said that the Laffer Curve didn't apply at American levels of taxation". You could have violated their "line on taxation" concerning more than the Laffer Curve.
Anyway, your assertion about the Laffer Curve not applying is potentially wrong in two ways. First, a technical point: the Laffer Curve is just a curve. It has values of tax collections for every tax rate. It applies for all rates. I guess you meant by what you said that any tax cut now would cause lower tax collections. The trouble here is that you simply don't know this to be true. If the stories about Charles Rangel's new tax bill are correct, he seems to disagree WRT corporate taxes.
I'm not sure whether your review should have been spiked, but something needed to be done.