Sunday, April 4, 2010

Laffer Curve

So, I was at the bookstore browsing through the business section and came across a book by Steve Forbes, Capitalism Will Save US. Aside from it appearing to be an overall interesting book, I came across a chapter that discusses tax cuts simulating economic activity and leading to more overall tax revenues. It is an economic theory called the Laffer Curve. I have encountered this theory numerous times throughout the years in both my education and in articles, but I haven't researched it for its empirical veracity. There are many critics who say we are not on the side of the curve that increases tax revenue (such as one of the few ultra-liberal economists, Krugman), but actual studies that present data seem to be in short supply. I plan to research this a little more thoroughly for a more in-depth blog article, but a cursory search on information led to a study by the independent International Monetary Fund (IMF) that showed tax revenues increased in Russia when they cut taxes to a flat tax system.

More to come.

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