Talk:Laffer curve/Archive 1

Archive 1

Archive 2

Archive 3

The Real Controversy

At some point, this article should be cleaned up to delete statements implying that the existence of a "laffer curve" is under dispute and needs things like "empirical testing."No serious economist doubts that there is some point between 0% and 100% where tax revenues will be maximized, and that revenues will fall of towards 0 to either side of that point. The only controversy is over where we are on that curve! GeneCallahan (talk) —Preceding undated comment was added at 19:18, 14 November 2008 (UTC).

must be a typo

Hi all; the lead sentence in paragraph 3 of this article is not at all clear and I think it must be a typo; "To what extent these assumptions are true are beyond the scope of the underlying mathematics is unprovable,..." I'm not an economist and wouldn't presume to edit but thought I'd ask. '

— Preceding unsigned comment added by 70.130.162.144 (talk) 14:02, 3 October 2007 (UTC)

Laffer curve

"The result of the tax cuts along with government spending policies of the era was large budget deficits."

No, it wasn't. The budget deficits were the result of the Congressional Democrats outspending the increased revenues by 2:1. In the 20s under Calvin Coolidge, in the 60s when Kennedy's proposed tax cuts were enacted after his assassination, and in the 80s, federal revenues increased after tax cuts. How can budget deficits be created when revenues are increased? By outspending them!

Erm, I'd like to point out the budgets Congress passed differed very little from the budgets Reagan submitted to Congress during his Administration. The Myths of Reaganomics goes into pretty good detail as to what happened in the 80s under Reagan. --Mr z 14:40, 28 November 2006 (UTC)

This is a gross oversimplification. The congressional Democrats were no more guilty of "outspending" than their Republican counterparts or, indeed, the Reagan administration itself. In particular Reagan's massive military buildup outweighed the meager spending cuts he was willing to accept. Haukurth 15:08, 25 Sep 2004 (UTC)

That's beside the point - it doesn't matter whether it was Democrats, Republicans, or little green aliens outspending the increased revenues. The point is that the increased revenues were outspent, thus increasing the budget deficit. --Dachannien 23:36, 15 July 2005 (UTC)

Consider: Because the current system taxes a larger percentage if your income is larger, and thus reaps a larger revenue, and because the people that get the lowest tax rates also need to make the least money, the net income for the amount of time spent working towards your gross income is largest if you are middle class. Being middle class requires less effort and risk than being upper class, and has more reward than being lower class. That might explain partially why people tend toward being middle class, and why the middle class is the largest class. - Augur

No, the real problem is that it's false to claim that revenues increased. Only nominal revenues increased. If the government froze its spending in nominal terms, it would clearly provide less and less each year. The truth is that real tax revenues took about 6 years to recover to their previous levels. Asacarny 09:08, 16 December 2005 (UTC)

So the "Laffer curve" is not really a curve but rather the simple statement that there's a point of maximal revenues between 0 and 1? I had expected a "real" curve with a formula ... 193.171.121.30 07:30, 21 Feb 2005 (UTC)

No there is no formula, but if you had one it could solve some problems. BrokenSegue 11:39, 20 Apr 2005 (UTC)

The weakness in the definition given here is that it states the only personal taxpayer reaction to a tax rate on the right hand side of the Laffer curve is to work less. While that is a primary reaction, the aggressive use of tax shelters (e.g. KPMG's latest apology) and the distortions high tax rates introduce into many investment decisions also need to be considered. -CA Dreamer

Zero revenue at 100% tax rate?

Anyone arguing that tax rates won't be exactly zero at the 100% rate must also argue the same for the other end.

You don't think a small minority of people would make donations to the government? Or commit resources in some way for the public good? (which is an effective revenue stream for the govt)

Anyway, such discussions are missing the point of economic theory as others have correctly noted. —Preceding unsigned comment added by 68.198.48.12 (talk) 15:26, 23 February 2008 (UTC)

At the other, where there is a 100% tax rate, the government collects zero revenue because taxpayers have no incentive to work or avoid taxes and the government collects 100% of nothing.

This doesn't seem right to me. Even if there were a 100% tax rate, some people would still work for non-monetary reasons—because they enjoy what they do, or because they feel a responsibilty to work, or simply because they are bored. So, the revenue would not necessarily be zero.

(Not that I think that tax rates should be 100%! It's just that the argument for an optimal tax rate seems oversimplified here.)

—Steven G. Johnson 05:48, August 16, 2005 (UTC)

Well, you're right that it wouldn't be exactly zero, but economists like to work in near-absolute but not quite absolute numbers (since empirical data is so easy to fudge). The point is that it would be quite close to zero since nearly all rational actors would flee the tax jurisdiction, conceal economic activities, become beggars, etc. Of course, there are irrational actors, but they are usually a minority and the last time I checked, economics is still trying to decide how to model their behavior accurately. --Coolcaesar 11:48, 16 August 2005 (UTC)

Which economists, in particular, argue that revenues are approximately zero at 100% tax rates? —Steven G. Johnson 16:41, August 16, 2005 (UTC)

No firm will voluntarily "pay" someone for employment if 100% of his payment will be collected by the government. This would defy the assumption of profit maximization on the part of the firm, as it would assume part of the economic incidence of the taxation. If the employment is entirely voluntary, i.e. the employee is indifferent to whether or not he is "paid" because he will receive no money, no firm will attempt to pay him. It is not illegal to work without monetary compensation. Given that Leisure has non-trivial utility, the assumption that some people (beyond a statistically insignificant amount) would seek employment while 100% of the return on their efforts is taxed strikes me as ludicrous. Far more likely, people would either 1. enter the underground economy, or 2. produce non-taxable goods and barter these, or anything else to escape the taxation. For a supposedly economic-oriented article, this is pathetic, as it doesn't even mention the deadweight loss of taxation, nor the substitution effect that drives it. Thats wikipedia standards for you, I guess - E Plumlee 11/6/2005

Hold on there... people world easly work for nothing IF all of their needs were also satified by the governmnet. This is a major failure of the laffer curve, it presumes that no one will work for nothing, bu fails to balance that against the backdrop of what the governemtn can do for the rational actor with that money. Theoritcal revenue of taxation is the amount of income REPORTED times the tax rate. Income reported will have everything to do with satifaction with the government services provided and not the absolute rate of taxation. Cheating or gaming the system will increase as the system approached 100% taxation, but cheating can never reach 100% ( then there is no government ) and therefore tax recipts can never be 0. This type of economic activity can easly be seen in many systems including total communism as well as many religious orginizations where people are often given tasks for years without pay under the assumption that all of their living expenses would be taken care of and in return others in the community would do the same for them or their family if tragedy struck. E. Warnke 1/13/2006

In reply to the above post, If people are having all of their needs provided by the govt, then they are being compensated. They are being paid for their work. The debate on this laffer curve is based on a capitalist society, in which there is no compensation for work at 100% taxation. If a person were to chose to work and a company would agree to pay them (never happen at 100% taxation), they would recieve nothing. HERE is why it is wrong to assume that, in the long run, people would still work: If there is literally NO compensation, no food, no money, nothing for time spent working... the sheer weight of the opportunity cost of working for free (as opposed to getting food, shelter, clothing etc..) would overwhelm even the most irrational of actors in such a model. Unless the irrational actors undertook a second, blackmarket job, in which they were compensated with something or beg on the streets in their free time, they would theoretically starve to death. In the long run, such a high percentage of originally irrational actors (people doing it because they love their job) would have little choice than to stop working for free, and better utilize the majority of their waking life in aquiring goods neccessary to continue to live. IMO, zero tax revenue in a 100% taxation model (capitalist system) is as safe an estimation as 0 tax revenue in a 0% taxation model (capitalist system). Cause some people will still give money to the govt (irrationally)

whether or not taxation elasticity holds true in a communist society isn't really the point here. (although I would argue that it does) Tax recepts can never be zero, you are correct, however, they will be zero so long as all actors act rationally. Some will not. <-- this will cause the derivation in all economic models. No economic theory can be taken to be finite in its conclusions... as there will always be people who act irrationally. Cowboy357 15:03, 13 October 2006 (UTC)

I would like to point out that the costs of enforcing 100% tax must be considered, as those costs will offset revenue. A 100% tax with little or no enforcement is effectively no tax at all. A general forced imposition of 100% tax (enforced by leagues of uniformed and armed blackshirts, I imagine - the equivalent of a civil war) is tantamount to slavery - an institution noted by Adam Smith in the 1770's as uneconomical due to these enforcement costs.

Furthermore, E. Warnke said:

Hold on there... people world easly work for nothing IF all of their needs were also satified by the governmnet. This is a major failure of the laffer curve, it presumes that no one will work for nothing, bu fails to balance that against the backdrop of what the governemtn can do for the rational actor with that money.

People working for nothing does not increase revenue to the government. Furthermore, actors would work for nothing in a 100% tax regime. All but a few would choose to work for their own non-monetary gain, or in black-market enterprise, rather than effectively non-remunerative legitimate industry.

Octothorn 10:41, 3 February 2006 (UTC)

Personally I don't have a problem with the article saying that the Laffer curve only applies to market and mixed economies and is not a particularly useful description of what happens in a genuinely socialist economy. While it's very possible to get worked up about what would actually happen at 100% tax rates, it's not an important criticism of the Laffer Curve itself. The Land 14:09, 3 February 2006 (UTC)

This is where I have to say you're wrong. It's a very important criticism of the Laffer curve, because the entire justification for such a curve relies on those two endpoints both being zero. If you can argue that the endpoint at 100% taxation is somewhere above zero (as it must be for any truly socialist economy to exist), then it makes any estimated shape of the curve much more difficult to define. Half of the explanation for the modern Laffer curve relies on the assumption that socialist economies cannot exist. As a very general explanation that at some point, tax revenue will fall if taxes are too high, the Laffer curve works, but it's much harder to apply it to actual problems. This is why far more policy-makers believe in the Laffer curve than economists. —Preceding unsigned comment added by 210.1.26.55 (talk) 04:38, 5 September 2007 (UTC) Edit: The Above is mine. (Harlequin115 04:48, 5 September 2007 (UTC))

A few quick points:

1) Does the Laffer Curve refer only to income/corporate tax, or also to sales (goods) taxes and capital gains taxes?

2) It seems to me that the theory works when referring to a specific industry within an economy (e.g. Reagan's experience in acting) but struggles when applied to the economy as a whole. I.e. if all tax rates were set to 100% noone would trade or buy or sell anything - money would become useless and the government would have to feed and house the population in return for labour. The government would still exact 'revenues' but these would be 'paid-in-kind'. So it seems to me that the theory is just not applicable at the higher end of the spectrum as such extreme tax rates would undermine the national currency.

3) The curve seems to be no more than a graphical extrapolation/(mis)representation of Ibn Khaldun's 14th century summary "[When taxes are raised significantly,] businessmen are soon discouraged by the comparison of their profits with the burden of their taxes...Consequently production falls off, and with it the yield of taxation". It is fascinating to learn that the Arabs were so advanced in economics even before the Renaissance - I wonder how many people realise that the Arabs were the most sophisticated nation in the world prior to their 800-year subjugation by the Turks. --84.12.21.104 01:31, 3 May 2006 (UTC)

this discussion is pointless becouse You are too much affected by the point where there are 100% taxes... it's 100% theoretical and 0% practical... point is that sometimes it's better for government to lower the taxes in order to get higher revenue and sometimes it's better to make taxes higher it is just a hint for politicians who may think that only rising taxes yields higher revenues which seems pretty logical without khaldun-laffer curve Jerzy czaja-szwajcer 12:17, 26 May 2006 (UTC)

the example of a socialist state pulling in revenues while the tax rate is 100% can always be made because everyone who works, works for the state, and the state does not tax itself. no one gets any profit. the only wealth is power, and all power and therefore all wealth is centralized -- with one person or one small group at the top. you clearly can't argue that such "revenue" is going to work. as to the example in question, the USSR had revenues from oil exportation, and indeed they still could. they are energy independent. except, they collapsed internally, with no money left even to hire people to beat the citizens into submission. sure, they had revenue, but how much? bread and vodka for khrushchev on tuesdays? chait makes absolutely no assertion that socialist states are actually viable, and laffer himself refuted the entire chait article which is referenced to provide this so-called criticism, so i wouldn't call that particularly notable. 128.128.98.46 (talk) 16:02, 20 May 2008 (UTC)

The argument about 100% tax rates and socialist societies misses out vital facts. Tax law affects only free people operating in the legal economy. It does not affect slaves or criminals. The workers in socialist societies are not analogous to workers in free Western societies. A worker in a socialist society is a slave of the government. He is not paid as such, but he is not legally free to do different productive activities.

Let me explain it in this way, let us say that I own a slave. I give that slave $50. Is that $50 his or mine? I submit that the $50 is in fact mine because the person to whom I gave it belongs to me as a slave.

Under socialism, the worker engages in productive work because his alternatives to productive work involve Gulags and Killing Fields. If I am taxed at 100%, and have a gun pointed at my head, I would do what the person holding that gun said. This is how people work under 100% taxation.

I do have another choice: crime. If I will break the law against selling ecstasy, I probably won't have a huge problem with tax evasion. CMarshall (talk) 05:48, 28 March 2009 (UTC)

Intro

Cut from intro:

although initially suggested by many before him (see below), is a concept often used to justify tax cuts and is intended to show

Originality of the idea is not at issue. The last sentence of the intro has Laffer giving credit to someone else. Saynig "not an original idea" is the punch that softens up the reader for the knockout blow to follow: that it's "only used to justify tax cuts".

Better to say that the Democratic Party opposes tax cuts, and that's why they oppose the Laffer curve. Or if not Democrats, then some other group, but we need to name the critics instead of making the criticism ourselves.

Who says that every tax rate is set on the left side of the curve. (Not - surely - leftists! ;-)

Is there anyone who say that the idea itself is valid but was misused in certain circumstances? Or do critics all say that the idea is invalid in all circumstances? --Uncle Ed 21:11, 12 June 2006 (UTC)

Economists usually accept the core idea of the Laffer curve--that at some point of taxation, marginal revenues of an increase in taxation will be negative--but the Laffer curve is far too imprecise and inaccurate to be used to determine tax policy. In all honesty, supply-side economics in general are far more useful to politicians than to actual economists. (Harlequin115 04:47, 5 September 2007 (UTC))

Cleanup

--- Removed this section: " The Laffer Curve assumes that the Government will collect no tax at a 100% tax rate because, rationally, no person will choose to carry out work if they receive none of the economic return from that work. However some economists question whether this assumption is correct. For example, in classically structured Communist societies, there was an effective 100% tax rate and, whilst these societies may have been highly inefficient, people did continue to work to some extent. "

Laffer Curve says that government will not collect income tax revenue. In these Communist societies with "effective 100% tax", they aren't actually getting any income so there's no income tax. Alternatively, you could argue that people in these societies were 'paid' in other less quantifiable ways. This results in less than 100% tax and which is why they worked.

So, saying that there is an "effective 100% tax" in such examples is a fallacy. ---

Examples of the Laffer Curve being correct are mixed in with "criticism". Does this mean critics are unhappy because the idea is correct?

We need to say why the critics are unhappy. Are they saying that certain tax rates should be higher? That is - while accepting the premise of marginal rates and Taxable income elasticity - they claim that a rate (like federal income tax) is "on the left side of the curve"? This would put them in opposition to others - who accept the same premises! - but who claim that the rate in question is "on the right side of the curve".

Let's detach "tax increase advocacy" and "tax cut advocacy" from the general idea illustrated by the Laffer Curve.

Are people saying they disagree with the concept of an optimum rate? Or do they accept this but disagree over where the optimum is?

Secondly, are there people who want to increase tax rates for reasons other than increasing revenue? Such as "sticking it to the rich"? Or as part of an wealth redistribution scheme, as in some variants of socialism? --Uncle Ed 20:43, 13 June 2006 (UTC)

Renaming "Laffer Curve" article to "Taxable income elasticity"

The article appears to have been renamed. Was there any discussion of this change of name? It seems a bit too radical to me. For starters the term "taxable income" implies that the laffer curve applies to income taxes only. It is certainly general enough to apply to things such as VAT and GST also. Pretty much any tax based on transactions will have an impact on terms of trade. I don't agree with the name change. In common usage the concept is still refered to as the "Laffer Curve". Terjepetersen 02:12, 13 July 2006 (UTC)

I concur with you on this one. Wikipedia naming policy is to conform to the common usage in a field. Unless someone can produce a citation showing that at least some economists do commonly refer to "taxable income elasticity," I suggest that the article should be moved back to "Laffer Curve." --Coolcaesar 20:28, 13 July 2006 (UTC)

I have undone the move. It was a silly idea and there was no consensus for it. I am moving all the relevant discussion that was here to Talk:Laffer curve. Some of the page history will end up at [[Talk:Taxable income elasticity; sorry, bit of a bad move job by me. The Land 16:58, 15 July 2006 (UTC)

Eco folks keep reading - in 1985 I sent the explantion below of the Laffer Curve to Irving Kristol at The Public Interest and he sent back a kind note "very cogently done"). B-52 performance manuals [T.O. 1B-52D/G/H-1-1 or -11-1] had/have numerous charts that mirror the Laffer Curve as shown on the web page at the upper right. "Effect of off-speed or off-altitude on range" is exactly a Laffer Curve. For any given weight and configuration, there is ONE speed-altitude schedule that will produce the maxiumum possible range. Flying higher, lower, faster, or slower than the schedule will result in a range decrease. The chart is denominated in "% of max range" where the vertical line at the top center (as with the Laffer Curve figure on the web page) is 100% of the possible range. The range available falls off in both directions from there; 99%, 98%, etc. If you take the "fuel flow per hour" charts and divide the fuel burn rate by true airpseed, you get a "nautical miles per pound of fuel" curve that is again a Laffer Curve. If you want the maximum MINUTES per pound of fuel you fly one schedule. If you want the maximum MILES per pound of fuel, you fly a different schedule . . . and endurance (minutes) is ALWAYS a lower speed than range (miles). In a jet, this Laffer-type Curve behavior results from the summation of two inversely proportional values. Induced drag (lift, downwash, and tip vortices) decreases with an increase in speed. Parasitic drag (just pushing the air out the way and the increases in the jet's frontal area) increases with speed. Other things exhibit the same chracteristic and for the same reason; for example, parachutes. The lowest possible opening shock on the crew dog occurs around 13,000 feet. Two variables are inversely proportional. The thinner the air, the faster you fall through it, so the shock component from the velocity change is large - you have more speed to give up. However, the thinner the air, the longer it takes for the canopy to inflate, so the speed change occurs over a longer time, lowering the load. The opposite occurs in thick air. You fall through it more slowly but the 'chute opens much faster. Somewhere between sea level and 50,000 feet there is a "magic" altitude with the lowest possible opening shock. You want a long opening time from a low speed and that's about 13,000 feet. [Note: "Best corner" (the max rate of turn possible) is another jet problem with only one solution but it does not arise because of inverse proportions. Where the lift curve crosses the structural strength line is a different thing entirely.]

As I appreciate Laffer's insight, the theory was that, at some point, the incentive to have more money would be overcome by a decreasing marginal return, especially in the upper brackets.

Observe further that there are an infinite number of "wrong" tax rate pairs on the Laffer Curve that will nonetheless produce the identical tax revenue. You can get, say, 78% of the maximum possible taxes paid in by being, say, 17% too low or by being, say, 12% too high (or vice versa). Jets also act that same way, in that any given fuel flow/thrust setting will hold either of two speeds. One will be on the back half of the curve (below best endurance) and the other will be above it (faster than best endurance) on the front half of the curve. That's why the same throttle setting can hold either of two speeds.

To me, the rub for Laffer's critics is the assumption that we are always on the left half (no pun intended) of the curve, the "region of reverse command" in which it takes more power/thrust/gas to fly more slowly; the area less than best endurance . . . and not on the right (no pun) half, the "region of normal command" in which any increase in thrust results in an increase in speed. If we were indeed above the max revenue rate in 1981, then lowering tax rates was the correct move (provided, of course, that increasing revenue was the goal). On the other hand, if we were left/below the max money rate in 1981, then we should have raised rates even further.

Wiring a jet like a pinball machine and taking careful measurements of "miles per gallon" is of course far, far simpler than setting a tax rate. Jets are noticeably easier to control and predict than either taxpayers or voters.

So, if Kemp-Roth was a bad idea, to what higher rate should taxes have been raised? If the current rate cuts sought by Pres. Bush are a bad idea, to what new, higher rate should the IRS be told to set its sights?

LSU Law 05 06:32, 27 July 2006 (UTC)

Dollars and Sense - worthy of our reference?

The Dollars and Sense piece referenced by our (increasingly wonderful and iteratively more brilliant) article on the Laffer Curve includes some questionable, if not outright incorrect, statements that make me wonder if it is worthy of our mention.

It represents a marked POV with statements like "...Bush officials have not explicitly cited Laffer's arguments in defense of their tax packages. Probably, they wish to avoid ridicule." and "Some of the Republican faithful continue to argue that tax cuts will unleash enough growth to pay for themselves, but most are embarrassed to raise the now discredited Laffer curve."

The phrase "the now discredited Laffer curve" seems exceptionally ill-chosen, since the Laffer curve is widely ackowledged - it says so right there in our (increasingly wonderful and iteratively more brilliant) article! The main points of contention are the usefulness of the curve to decision regarding tax policy, our current position on the curve (left-side/right-side), and the overall impact of supply-side tax relief.

But my largest grievance with the Dollars and Sense column is against the author's characterization of the economy's performance following the tax cuts. The author relates that "economic growth was tepid through much of Reagan's presidency" and that "Die-hard supply-siders insist that the Reagan tax cuts worked as planned—the payoff just didn't arrive until the mid-1990s!

I'm not sure how the author is measuring the U.S. economy or where her statistics are sourced from. I took a look at the Bureau of Economic Analysis Historical Gross Domestic Product Estimates and Historical Prices of the S&P 500 Index, and they paint a different picture:

History of US Economy under Reagan and Clinton (in 2000 Dollars)

Period	Starting GDP	Ending GDP	%Change	Starting S&P	Ending S&P	%Change
1980-1988	$5161B	$6742B	31%	114.16	277.03	143%
1992-2000	$7336B	$9817B	38%	408.78	1380.2	237%

Am I overlooking meaningful statistics that would support the author's descriptions? Are there any staunch defenders of this article as a scholarly and unbiased reference that is worthy of inclusion in our (increasingly wonderful and iteratively more brilliant) article? dpotter 02:27, 20 October 2006 (UTC)

While I'm not familiar with the article you referenced, some meaningful statistics could be a look at changes in real GDP per capita, as opposed to simply total GDP, as real GDP per capita would ignore changes in GDP due to population shifts and inflation. In that case, real GDP per capita increased from $23061 to $26725 (in 2000 dollars) from 1980 through 1987, an increase of $3664. By contrast, from 1992 to 2000, real GDP per capita increased from $28601 to $34785 (again, in $(2000)), an increase of $6184. This is a fairly significant difference. The source for GDP figures was "Louis D. Johnston and Samuel H. Williamson, "The Annual Real and Nominal GDP for the United States, 1790 - Present." Economic History Services, October 2005, URL : http://www.eh.net/hmit/gdp/" -(Harlequin115 06:52, 5 September 2007 (UTC))

Khaldun-Laffer curve

I removed the following from the lead paragraph: (or Khaldun-Laffer curve)...developed by Ibn Khaldun and popularized and promoted by economist Arthur Laffer.

The phrase "Khaldun-Laffer Curve" is a neologism, and an inaccurate one at that. Google returns 27 hits for the term (versus 228,000 for Laffer curve), and most of those are copies of the same 2-3 articles. Furthermore, Khaldun developed the theory of the relationship between taxation and economic prosperity (in The Muqqadimah), but he did not represent it graphically or with a description of a curve.

Khaldun deserves the credit he receives in our fine article, but lets not champion a neologism on his behalf.

• Laffer, Arthur (1979-01-01). The Economics of the Tax Revolt: A Reader. Harcourt Brace Jovanovich. ISBN 0155189204. {{cite book}}: Check date values in: |date= (help); Unknown parameter |coauthors= ignored (|author= suggested) (help)
• Atiyeh, George Nicholas (1988-07-01). Arab Civilization. SUNY Press. p. 120. ISBN 0887066984. {{cite book}}: Check date values in: |date= (help); Unknown parameter |coauthors= ignored (|author= suggested) (help)

dpotter 07:29, 29 October 2006 (UTC)

Cleanup II

Boy is this poorly written. First, lose the scare quotes on "optimum" in the first paragraph. If necessary replace with a word that is less scary. Second, I think the historical section needs to go back to the Kennedy tax cuts and their impact on the economy. Most important though the prose needs to be cleaned up, the sentences need to be clearer, and the paragraphs need to actually have a point instead of an introduction and a bunch of random thoughts.

This reminds me of every economics text I have ever read. No wonder those guys are so dismal.

— Preceding unsigned comment added by 69.125.146.118 (talk) 12:50, 16 May 2007 (UTC)

The curve doesn't exist

While the proponents of the Laffer curve make claims about its applicability they never show the curve for the US economy. The actual statement by Laffer is really good, if it's good, at and only at the 0% and 100% tax rates. It is demonstrably true that the government does get $0 in revenue for all cases where the tax rate is 0%. Beyond that all discussions are hypothetical. Advocates of the Laffer curve don't use the Laffer curve, they use the concept of the Laffer curve, as they bend and mold it to fit their agenda. Mostly they declare that a reduction in the top income tax rate from something to something lower will cause an increase in revenue. Mostly they wait, however long it takes, for there to be an increase in revenue from whatever cause and then claim the observed increase is the one they predicted.

The anecdote about the curve being sketched on a napkin sounds familiar, but in the versions I recall of the anecdote Laffer sketched the curve in response to a question. The question to which he was responding is not revealed. Keynesian theory has it that reducing taxes on those who spend (that is, the middle income bracket) will stimulate the economy, even if it does cost the government some revenue. The people gathered at that lunch were more likely people who wanted a rationale for reducing taxes not on those who spend but on those who invest - or hoard. The tax rates are higher for that group and the desire very probably was to come up with a cover story for a reduction not for the spending bracket but for the top bracket. It's not entirely unlikely that the question was "How can we justify cutting tax rates at the high end rather than in the middle?"

There was a discussion in a Scientific American column in which it was shown that the shape of the curve is unknown. If the shape is unknown then it can't be said if it is smooth, can't be said if it has only one maximum. Absent an actual curve for the US economy statements about the applicability of the Laffer curve to US tax rates are groundless, other than at the 0% and 100% level. Even at the 100% level the assumption in the Laffer argument is that the individual earning enough to be taxed that high has the freedom to stop the flow of income.

Thankfully, we don't hear much about it any more.

Minasbeede 03:32, 5 June 2007 (UTC)

Hi, talk pages aren't for general discussion of topics. Please stick to facts and discussing how to improve the article. Thanks - Taxman ^Talk 13:52, 5 June 2007 (UTC)

The curve doesn't exist. No actual curve is ever shown. The article is about a phantom. I'd gladly see my comments pared down to that essential fact.

Thanks for your comment.

Minasbeede 14:01, 5 June 2007 (UTC)

Surely some curve must exist just by pure definition. Any given tax rate should result in some expected tax income.

If you're saying that it is impossible to predict any part of the curve at all then we shouldn't have any taxes because you're saying that we cannot predict tax income from the tax rate.

Surely to God, you must believe that raising the tax rate from 2%-5% will increase tax revenues. If so, then we can predict part of the curve! It's not completely unknown. Only part of the curve is as unpredictable as you make it about to be.

If you're saying most of the curve is unknown, then we should never raise taxes into the unknown range because that would just be a gamble.

Keep in mind the curve is EXPECTATION. If you're saying a range is unknown you're saying that you CAN'T EXPECT tax revenues to change one way or another by changing the rate. The Laffer curve is predicting EXPECTED revenues to increase when we raise taxes up to the maximum and predicting that we EXPECT them to decrease after.

Tax revenues are affected by many other uncontrollable random variables (e.g. if we got nuked tomorrow, 2008 would have pretty poor tax revenues nor matter what rate we choose). By effecting any sort of government policy, or making any decision for that matter, we can only change the EXPECTED value of our dependent variable.

Arguing that random events affect the curve is sort of a distraction unless you're saying that the curve is so dominated by them that the expected change in tax revenue is insignificant. And if you say that, we might as well keep the rate at the lowest possible part of this mysterious chaotic range of the curve.

Also, investing is not as bad as you make it out to be. The freedom to 'hoard' so freely is what has allowed the US economy to develop into what it is over the past 100 years and what has allowed third world countries to develop so quickly. Try not to be so negative.

Wall Street Journal article

See here  :) Count Iblis 22:01, 13 July 2007 (UTC)

Re: "back into" a continuous curve

You can "back into" a continuous curve by assuming the tax rate will be legislated with no more than a given number of decimal points. The resulting discrete function could then be interpolated with line segments, with the same result as the assumption of continuity.

You miss the point.

Go ahead, do what you propose and show us the result. --Minasbeede 17:41, 4 August 2007 (UTC)

The First Diagram

The diagram showing the curve would be more meaningful to most readers if the x scale were in percent, not 0-1.Landroo 17:51, 1 September 2007 (UTC)

Maybe we should consider using the image that is in the Polski article. The image is on commons. Morphh ^(talk) 21:34, 04 February 2008 (UTC)

POV in this article

BrendelSignature has made several changes to the article - filled with spelling and typographical mistakes - inserting selective POV that has no place in a neutral wikipedia article. Cited as a source is a Jonathan Chait article that contains such epithets and polemical ad hominem as "wingnuttery", "crackpots", "deranged" - hardly a serious scholarly source for criticism of the Laffer curve. Chait is not an economist either. Overall, a very unprofessional and clumsy attempt to skew the article and its opening lede with unhelpful and selective POV insertions. Nobel Prize is written as Nobel 'price' for example; and the Laffer curve is typed as the 'Laffter' curve. Wikipedia is not a political battleground for poorly sourced political hackery and epithets. 220.255.27.213 11:01, 16 October 2007 (UTC)

In earlier edits, BrendelSignature writes: "this curve is a joke", followed by wholesale insertion of selective and poorly sourced POV. Is this proper behaviour for what appears to be a Wikipedia administrator? Perhaps I'll have to ask another administrator to look into this. 220.255.27.213 11:05, 16 October 2007 (UTC)

Chait does cite reputable references in his work (though he unfortunately tries to "spice things up" by using strong language) and the New Republic is still one of the most reputable news sources in this country. Fact is nonetheless that the vast majority of economists do agree that this curve is faulty. The assertion that 100% tax = 0 revenue is indeed "a joke" (I am allowed to ridicoule the subject of an article in the edit summary when the article is strongly POV). We must not mislead our readers into thinking that the Laffer Curve is a widely accepted concept when it is not.

The only piece of truth most economists find within the Laffer curve is that at times taxes can dampen economic grwoth; thus, when tax rates are at high levels (much higher than the U.S. currently) a tax cut may indeed provide an economic stimulus. Yet, the idea that 100% tax = 0 revenue is obviously false as is the idea that there is only one peak.

For now, we can agree on having just Tobin in as someone who actually represents the community of American economists and provides a balance in the intro - just quoting Mises, who is hardly reprensative of most contemporary economists, is unacceptable. I think for the time being, we have established a sufficient balance. Signature^brendel 20:44, 16 October 2007 (UTC)

Thanks. That is a good compromise for now. (I agree that if there is a study that shows that "most economists" think the Laffer curve is bunk, it should be included. I just don't think Chait is a good source for it.) 220.255.27.213 08:01, 17 October 2007 (UTC)

I think we could do with a clearer explanation why supplysiders believe (or believed) that a simple cut in taxes would increase revenues; IOW, why did they believe we are on the "right side" of the curve? And for the simpleminded such as me, perhaps someone could explain this: tax rates are marginal, so it seems to me that there should be "Laffer curves", not just one curve. The maths of this would seem to apply if there was just one rate. Does it measure average rates or something? It seems to me that if you earned 300K at 75% and 200K at 100%, you would not stop working just because you lost all of the 200K at the top tax rate (although there would obviously be economic effects from it) and the government could still gain revenue from the 100% rate for this reason. Grace Note 01:10, 19 October 2007 (UTC)

Absolutely agree with your first point - it would be helpful to have this kind of explanation, but I think you will struggle to find it. As used by those who argue for tax cuts, the Laffer Curve has generally been a rhetorical rather than an academic tool. On your second point, the curve refers to the simple case where there is just the one marginal tax rate. LeContexte 10:09, 19 October 2007 (UTC)

I think there must be explanations of this kind somewhere, but I read a lot of wingnutty stuff online and I've never found one, so maybe you're right. The second point would seem to torpedo their theory right there. I guess I'll have to search for someone who says that. Grace Note 07:13, 22 October 2007 (UTC)

Lead

The lead is too long. Please reduce the size per WP:LEAD. Morphh ^(talk) 21:07, 04 February 2008 (UTC)

Article structure

Be careful of article structure. Consider reading Wikipedia:NPOV#Article_structure. There is too much built under a header of criticism. Break this up into relevant sections by topic point listing the both sides of the argument. Morphh ^(talk) 21:27, 04 February 2008 (UTC)

The Neo-Laffer curve

The new graphic is better, but the Neo-Laffer curve seems like a bit of a distraction. The fundamental point Neo-Laffer makes is that we can predict little about revenue from the tax rate because real-world data has too much noise. However, the concept is used in practice to asymmetrically bash only the right half of the curve. If the logic was applied symmetrically, one would have to conclude that RAISING taxes would also have an UNPREDICTABLE effect on revenue. This should at least be pointed out in the article. - Scott

This section seems too long (271 words, compared to 55 words for "Keynesian critique"). The figure is obviously a joke (the curve isn't even a function). A curve derived from U.S. economic data in the form of a function would be more appropriate. Jethro Dull (talk) 20:41, 7 March 2008 (UTC)

Indeed the Keynesian critique deserves way more than 55 words and certainly more than the neo-laffter curve. That's a vio of the due-emphasis guidelines. At the moment I don't have the time, but thanks for pointing it out. Signature^brendel 09:30, 8 March 2008 (UTC)

Gardner is stated in the article to have based his curve on actual "U.S. economic data", but there is not even a citation supporting the existence of a neo-Laffer curve. (So two citations are needed — one for the curve and one for the graph.) I have replaced the graph with one based on actual data, but as I have tried to plot the curve as that of a single-valued function of the tax rate, the effect might not be as striking. Do you think adding a loop-de-loop or two would imPOVerish the image quality? ~ Jafet (spam) 17:14, 15 April 2008 (UTC)

I think it's misleading and possibly incorrect for the neo-Laffer figure to use %GDP as the Y-axis. As I understand it, the whole point of the Laffer curve is that changing the tax rate will affect the nation's income-generating activities. As Scott explains, the point of the neo-Laffer curve is that the real "curve" is a snarled mess. I believe the Y-axes for both the Laffer and neo-Laffer curves are absolute government revenue. Factoring in the GDP is an interesting idea but clouds the point. In The Night Is Large, Gardner writes, "Like the old Laffer curve, the new one is also metaphorical, though clearly a better model of the real world." Google Book Search doesn't show Gardner's original figure, but the previous figure claims to be based on Gardner's figure, and it looks like this other version too. David@sickmiller.com (talk) 05:29, 12 June 2008 (UTC)

I'm sympathetic to your point about using %GDP. The trouble is, what's the alternative? You can't use absolute revenues since the countries' economies are so different in other ways. Cretog8 (talk) 05:38, 12 June 2008 (UTC)

Neo-curve section removed. No citation of academic support for curve, it violates notability and POV and has tremendous undue weight issues.75.49.223.74 (talk) 17:35, 28 October 2008 (UTC)

WikiProject, Category Economics?

Should this article be part of WikiProject Economics? Category? —Preceding unsigned comment added by Cretog8 (talk • contribs) 00:26, 22 May 2008 (UTC)

Page is a mess

This page is a mess filled with contradictory partisan statements. I'll try to clean some up, but it would be great if someone from wikiproject taxation had a look too. lk (talk) 14:48, 26 August 2008 (UTC)

Difficulties of measurement

The way the "Difficulties of measurement" section is written, it's hard to know where to search for references. Much of it reads like WP:OR, so I'll likely cut it soon unless someone fills in references. CRETOG8(t/c) 17:50, 6 September 2008 (UTC)

I'll see what I can find. This article does need a good deal of work. NPOV#Article_structure jumps right out at me. Morphh ^(talk) 19:41, 06 September 2008 (UTC)

I pulled it out. I expect there is something somewhere to back up some of it, but... Anyway, here's the diff. I expect if there's an article cleanup better criticisms will find their way in. CRETOG8(t/c) 06:34, 5 October 2008 (UTC)

2003 Non-partisan study

In the current version of the article, it says: "In 2003, the United States Department of the Treasury released a non-partisan economic study[7] showing that the 1981 tax act produced a major loss in government revenues of almost 3% of GDP." However, if you actually look at the study ( http://www.ustreas.gov/offices/tax-policy/library/ota81.pdf ), on page 8, it says, "Third, government revenue estimates do not take into account the effect of the bills on GDP, even though some bills (e.g., Tax Reduction Act of 1975) were primarily designed to stimulate the economy." In other words, the study assumes increasing tax rates will linearly increase tax revenues, neglecting GDP effects. This is a classic example of circular reasoning. A study run under the assumption that tax changes will not change GDP is being used to imply that tax changes will not change GDP sufficiently to offset the rate change. This reference should be removed, as it has nothing to do with this article. Mdfst13 (talk) 02:56, 24 February 2009 (UTC)

What is citation to Laffer's work?? And a summary of a literature search.

I came across this article, and I noticed that it didn't cite any particular paper or book by Laffer in which he proposed the idea. Having access to good databases and libraries, I thought I'd do a quick literature search and find it. Surprisingly, I can't find any recent economics paper (i.e. within the last 10 years, before which I can't get the papers electronically) that cites anything by Laffer—and this is in a search for "Laffer curve," so I'm only looking at articles with those words in the title or abstract.

It's very odd, and it makes me wonder: did Laffer himself actually publish his ideas in a peer-reviewed journal, or did he just pitch it to policy-makers? Or is it just so old that no one cites it any more? (I thought he was late 70's?)

Update: it turns out that Laffer does not claim to have originated the concept, but he seems to be responsible for promoting it to policy-makers, and the curve was indeed named after a presentation he gave directly to Dick Cheney rather than any academic publication. (I've updated the article.)

There is lots of academic research on the question of Laffer curves, by the way. (Mostly trying different economic models, including this factor or that factor, to try and analyze the effect of changes in tax rates.) Two of the most commonly cited papers from the last 11 years seem to be:

• Paul Pecorino, "Tax rates and tax revenues in a model of growth through human capital accumulation," J. Monetary Economics 36, 527-539 (1995).

• P. N. Ireland, "Supply-side economics and endogenous growth," J. of Monetary Economics 33, 559–572 (1994).

Pecorino cites earlier work by Fullerton (1982), Stuart (1981), Bender (1984), Malcomson (1986), and others, but no Laffer.

The basic question is summarized by Pecorino as:

Just about everyone can agree that if an increase in tax rates leads to a decrease in tax revenues, then taxes are too high. It is also generally agreed that at some level of taxation, revenues will turn down. Determining the level of taxation where revenues are maximized is more controversial.

Pecorino found optimal tax rates at around 64%, by the way (ranging from 54% to 70% depending upon the assumed parameters). Ireland, on the other hand, found the optimum at 15% (Pecorino attributes this difference to an oversimplified model on Ireland's part). One of his conclusions is:

The simulation results suggest that dynamic considerations will not overturn the conclusion that in 1980, the U.S. economy was, in some aggregate sense, on the upward-sloping portion of the Laffer curve (plotted with the presented value of tax revenue).

I'm not an economist, so I don't know quite how representative this view is, or how much it has changed. The Pecorino paper continues to be widely cited as of 2005, however, as far as I can tell.

—Steven G. Johnson 03:25, August 16, 2005 (UTC)

PS. Another interesting fact is that the term "Laffer curve" in economics and policy literature seems to have expanded far beyond its original meaning for taxation: I see usages for analyzing everything from prison sentencing to endangered-species laws. Some comment on this expanded meaning might be appropriate for the Wikipedia article.

Questionable assumptions

Do we really need this section? We are talking about capitalism here. Who gives a flying **** about macro communism? —Preceding unsigned comment added by 99.255.208.65 (talk) 19:24, 12 July 2009 (UTC)

Questionable assumptions, another viewpoint

I agree that this section is questionable but on different grounds than the previous post. If the taxation rate was truly 100 percent, then individuals would be providing work for absolutely no compensation. Lacking any form of compensation (including food) then an individual would perish and the tax income would of course be zero. In a communist state this is not the case since the population has retained some fruits of their labor in order to survive at some level. The curve reaches zero at 100 percent taxation precisely because an individual will perish with zero resources. —Preceding unsigned comment added by 71.238.173.224 (talk • contribs) 00:12, 26 September 2009

This section should probably go. It seems a misapplication of the Laffer curve to extend its use to a centralised economy, where people probably are not freely able to adjust their work output to economic inputs such as tax rate. In any case, there's a bit of journalistic licence in the article's representation of how the Soviet economy fared in the period and immediately afterwards - see Brezhnev Stagnation Gnomatic (talk) —Preceding undated comment added 13:04, 17 November 2009 (UTC).

It is wp:original research to say "it seems to me to be..." To reduce the possibility that any editor will bias an article, wikipedia employs a policy of reporting what wp:reliable sources state. If there is another source which claims what you state, we can add information from that source to the article; however removing sourced information with out a clear indication that the information is outright wrong is considered censorship. T34CH (talk) 15:57, 19 November 2009 (UTC)

Understand your point, maybe more information is required. The source article is weak and should be considered outright wrong when compared against the Brezhnev Stagnation article. Also, the source author is not trained in Economics. It somewhat a shame that some other edits which were not contentious and improved readability were also lost in the wash. In terms of other sourcing, Laffer himself seems a reasonable source if we say "Laffer said ..." Gnomatic (talk) 00:01, 20 November 2009 (UTC)

I was looking at the Heritage site article and saw assumptions which seemed questionable. Any statements about it's actual utility should be pulled from articles published in peer reviewed journals, or arenas with established editorial oversight. Nobel prize winning economists such as Krugman and Tobin put down the idea, and Robert Bartley, who Krugman ties directly to Laffer and the curves supporters, is quoted as saying "Economists still ridicule the Laffer Curve, but policymakers pay it careful heed." I think we can say that economists question the utility of the hypothesis. T34CH (talk) 19:05, 20 November 2009 (UTC)

I added the orginal article by Wanniski which also describes the Curve and is from such a source. I think one of the things we need to keep in mind in editing this article is that is an economic article about the Laffer Curve. As such, people looking for this article in Wikipedia would rightly be expecting it to explain what the Curve is and how it works, and that's what the article should mostly be about. The logic of the Curve itself is pretty bulletproof (0% tax = 0 revenue, 100% tax = 0 incentive, somewhere in between there is something different) and it would be a flat earth position to claim otherwise. There definitely are controversies over two things: a) where the maximum point on the Curve is (which nobody can really know) and b) the use (or abuse) of the Curve to justify tax cuts. It's fine to have a view on b), but this is not about the mechanics of the Curve itself. I would think most of that type of content belongs in the articles about the alleged abuse (eg Reaganomics). I guess an analogy would be an article on guns would mainly be about guns and how they work, rather than wars fought with guns. Just my 2c on the way to making a better article. Gnomatic (talk) 02:43, 21 November 2009 (UTC)

The use/abuse of the curve is important information about the curve... but you touch on a really important issue. This article should probably be merged with supply-side economics as most of the content is about that rather than the curve itself. As the article states, the curve isn't really a new idea, but rather a name used to popularize an application of the law of diminishing returns. There's not much more to say about it other than that and the popular usage of the term. Krugman gives an interesting overview of the curve and it's supporters in his book Peddling Prosperity. Are there other such overviews by economists that you can think of that could be used to flesh out this article (allowing extraneous info to be moved to other articles)? T34CH (talk) 19:38, 5 December 2009 (UTC)

I don't think it should be merged with supply side economics. Supply side economics has many other elements to it, such as regulation, and politics besides. The Laffer curve is, as you say, a simple but elegant thought experiment and that's what the article should be about. In itself, the curve is not really controversial. (By the way, Krugman does not argue with the basic principles of the Laffer curve. He argues with the assumed point on the curve and with policies such as Reaganomics which had many motives other than tax revenue for lowering taxes.) The Laffer curve is indeed not a new idea. In fact, the article should probably be called tax-income elasticity. Gnomatic (talk) —Preceding undated comment added 01:12, 6 December 2009 (UTC).

Changing the title might be a possibility. Perhaps merging it with elasticity (economics) makes the most sense (and what ever doesn't fit could be moved to supply-side economics). This isn't about Laffer at all, but rather about the supply-side economists adherents misusing/misunderstanding elasticity. Until then though, there's no reason to remove information about the controversies surrounding the use of the curve. That's just censorship. T34CH (talk) 01:54, 6 December 2009 (UTC)

This is an economic article and as such is primarily about how the Laffer curve (or tax-income elasticity) works. We should mention that there were controversies, which we do, and point to the main articles which discuss those controversies, which we also do. However, we must keep clear the differences between the curve itself (not controversial) and some contemporary policy (which some believe is controversial). Please see the "guns and war" comment a few above. Note there is also a section given to criticism of the use of the curve. Your point is fine, but it fits there. Regarding the ELNO, these are i) the original paper and ii) Laffer discussing his own work. They are definitely notable. I believe the other person who chipped in believed these were valid also. I agree the tax data one is fine to go, so it is gone. I'll try to adjust taking it all into account. Gnomatic (talk) —Preceding undated comment added 02:28, 6 December 2009 (UTC).

Requesting 3PO

I am requesting a third opinion because it seems Gnomatic and I are at an impasse. The Laffer Curve is a thought experiment used by supply-side economists to argue that taxes should be lowered. In the section above, Gnomatic states that the use of the curve should not be discussed here, while I think it should. This leads Gnomatic to remove sources such as this article, which states:

"If there's one thing that economists agree on, it's that these claims are false. We're not talking just ivory-tower lefties. Virtually every economics Ph.D. who has worked in a prominent role in the Bush Administration acknowledges that the tax cuts enacted during the past six years have not paid for themselves--and were never intended to. Harvard professor Greg Mankiw, chairman of Bush's Council of Economic Advisers from 2003 to 2005, even devotes a section of his best-selling economics textbook to debunking the claim that tax cuts increase revenues."

Also, I believe that these links violate wp:ELNO #1, while Gnomatic believes that they are notable. I am not aware of notability being a criteria for inclusion in the EL section. T34CH (talk) 18:20, 6 December 2009 (UTC)

As there are now more than 2 disputants I have declined to provide a 3rd opinion, via WP:3o. Consider filing an article WP:RFC if the dispute cannot be resolved. Hipocrite (talk) 16:14, 7 December 2009 (UTC)

Discussion from previously involved editor

I've been following this and I think it's an important distinction that Gnomatic is trying to make here, don't confuse Laffer Curve with how it may have been used/misued in the past (ala "Guns don't kill people"). The Laffer Curve is not a political stance so it should not be presented as such, nor is the Laffer Curve a thought experiment anymore than innumerable other propositions in economics. It is not unreasonable to mention its use/misuse by politicians (with references) but that should be short and clear that the curve itself is politically agnostic. As far as the external references, surely the original paper and Laffer himself discussing the curve only add to topic. Where those references are located in cyberspace is of no relevance. I appreciate the hard work I've seen both of you put into the page but it is essential to keep it apolitical. You can link to pages on Reagonomics etc. but again, this page should stick to the point ... citing a casual comment using terms like "ivory-tower lefties" really has no place in the article ... whatever claims the author is speaking about is not about anything said in the original paper or by Laffer himself ... that quote may or may not be appropriate in an article about Bush Admin tax cuts (although it is lacking in verifiability and mostly hearsay). I don't want to discourage your edits but there are very much misplaced on this particular page which should just stick to a textbook like description of the curve without any political overlay. BobKawanaka (talk) 21:21, 6 December 2009 (UTC)

Bob, I appreciate your help, but I was hoping for a fresh set of eyes on this topic (some one with no preconceived notions). For the record, I think you are misinterpreting the sources. Krugman does not see the curve as apolitical, and does not differentiate the curve from supply-side economics. The Time magazine article doesn't either (and the quote is about the practice of using the curve in general, not about the Bush administration specifically). A solution to this issue might be to create a small section in elasticity (economics) about Laffer, and merge the rest into supply-side economics, but much of the language here glorifies the usefulness of the curve. If this article says anything about how useful somebody thinks it is, it needs to also give appropriate wp:WEIGHT to how unuseful economists think it is (especially when Laffer himself says in the Time article that it shouldn't be used as it has in the past).

As for the ELs, I wasn't talking about where they were hosted. I was talking about the first line of wp:ELNO:"Any site that does not provide a unique resource beyond what the article would contain if it became a Featured article." The Heritage article is already used as a source, so I'm not sure what is accomplished by linking to it twice. The Public Interest article is not an academic journal article (the journal was quite political--further evidence against the curve being apolitical--and I don't see evidence of peer review). This was also not the first time the concept was described in the press. That link seems to be at odds with ELNO #2 as well as the WEIGHT section of wp:EL. T34CH (talk) 22:11, 6 December 2009 (UTC)

I have to strongly disagree on the EL. I honestly can't imagine two better links than those two. The original paper where it came to be and a paper by the "inventor" of the curve himself. Merely being a piece by Laffer isn't enough to warrant inclusion, but it is directly about the curve. Any theory in economics or physics or chemistry where the original work was available would surely be linked. Why would anyone interested in the Laffer curve not want to see the original work? We should be happy the links are both freely available on the web.

I don't see anything wrong with a section about its use/misuse ... it's a hot button and would be silly not to mention it (I haven't looked through everything but I don't get the sense Gnomatic is against that ... he/she only seems to want to make sure that we're clear that the curve is the curve, not the politics or past misappropriations of the curve).

This is a bit of semantics but extremely important: when economists make blanket statements about the curve, they are speaking of a particular policy implementation related to the idea that tax cuts can lead to higher revenues ... an administration can make a mistake about the true shape of the curve and where the economy lies on it. It is clearly true that there are instances where lowering taxes leads to higher revenue (in extremis, lowering from 100 to 99%) ... so this sort of commentary on the curve itself is misplaced. Commentary on the effective/ineffective use/misuse of the curve is reasonable. It's a difficult tightrope and one that partisan writings of all persuasions rarely try to get right. This is where Wikipedia should shine. BobKawanaka (talk)

Bob, I've made this into a subsection as the whole point of requesting a 3PO is to get the opinion of a totally uninvolved editor.

• "The original paper where it came to be" - This is an untrue description of the Public Interest article. The term had been introduced long before this and used nonchalantly in the popular press at least 3 times before that article came out. Besides that, everyone including Laffer agrees that the concept isn't new at all, just the use of the name is. The concept was discussed countless times before this as tax elasticity as early as the 30s, and apparently even in Muqaddimah in the 1300s. And it violates ELNO #2.
• "a paper by the "inventor" of the curve" - A) he's not the inventor (see above) B) it's already used as a source. What else is missing from this article that is in that source?

As for the rest, I think you are making a distinction that doesn't exist. The supply-siders just repackaged an old concept in a slick package to let them claim taxes could always be lowered. The "Laffer curve" is not separable from supply side economics. Tax-elasticity is. T34CH (talk) 02:13, 7 December 2009 (UTC)

Nowhere within the presentation of the Laffer Curve is the claim "taxes could always be lowered" ... it *clearly* never suggests such a thing, one need only look at the shape ... this is indeed the very reason for the care that must be taken in this article to distinguish between the Laffer Curve and the commonly held misinterpration of it that by itself, it suggests "taxes can always be lowered" ... I know for example that I grew up thinking that's what it meant ... I know some factions claim this and I know that they try to appropriate the Laffer Curve for their purposes ... and it is reasonable to mention this in this article, i.e., that historically people have mis/over/wrongly interpreted what the curve is ... but we simply can't say there is a one-to-one relationship between the curve and claims that taxes can always be lowered (and the attendant criticism that this is nonsense) ... I think this is the fundamental point that Gnomatic was probably trying to get across. The fact that many don't understand this presents a "teaching moment" for Wikipedia, again, I believe a perfect opportunity to keep this an NPOV article. BobKawanaka (talk) 02:37, 7 December 2009 (UTC)

Bob, the problem is that what you understand, and what Laffer was originally demonstrating in 1974(ish? he doesn't really remember this), is simply the law of diminishing returns. You're right, in that there is no one-to-one relationship between this and supply-side economics. However, it was the the so-called "Laffer curve" which was used (mis/over/wrongly) specifically for the purposes of supply-siders. It was a tool invented for this purpose (otherwise why would the supply-siders need a new name for something which already existed). The idea that "taxes could always be lowered" was simply the position that supply-siders always seemed to take, my point being a all-too-strong relationship between the curve and supply-siders, not between the curve and this one policy position of theirs. T34CH (talk) 18:52, 7 December 2009 (UTC)

It's exactly the point: this is an opportunity to present what the Laffer curve is and how it works in a factual and encyclopedic way. There are a lot of misconceptions which can be corrected with a good article. The "Laffer Curve shows that lower taxes always increase tax revenue" is one (it shows no such thing). The equivalence of the Laffer curve and Supply Side Economics is another (they are very different). Gnomatic (talk) 13:06, 7 December 2009 (UTC)

What is factual about the Laffer curve? There's a high probability that 0 revenue will be raised at 0% tax rate, and argument over whether 0 will be raised at 100% effective tax rate. The rest is totally ambiguous. There are those who argue for multi-peaked curves, double-peaked curves, and the "technosnarled" Neo-Laffer curve (with the only relatively understood regions being near 0 and 100%). This article should be about the social phenomenon and cultural history of the Laffer curve, not about the concept of elasticity or diminishing returns. T34CH (talk) 18:52, 7 December 2009 (UTC)

This article is an economic article about the concept of the Laffer curve. People searching for an article are looking for a clear explanation of the subject. It most certainly is about the concept of elasticity and diminishing returns because that's what the Laffer curve is. If you would like to start a separate article about "the social impact and cultural history of the Laffer curve" please feel free. A link to that article from here would be appropriate. Gnomatic (talk) 23:42, 7 December 2009 (UTC)

"It most certainly is about the concept of elasticity and diminishing returns because that's what the Laffer curve is." So why do we need multiple articles on the same concept? T34CH (talk) 23:50, 7 December 2009 (UTC)

I'm a bit confused. In the comment above you said the article should be "not about the concept of elasticity or diminishing returns."08:14, 8 December 2009 (UTC)~ —Preceding unsigned comment added by Gnomatic (talk • contribs)

That's right, I did say that. Why do we need multiple articles on the same subject? T34CH (talk) 21:40, 8 December 2009 (UTC)

I don't understand; are you ignoring the question? T34CH (talk) 17:45, 10 December 2009 (UTC)

(←) Not ignoring the question. Just a bit flumoxxed. As I said I would like to see an economic article and clear explanation of what the Laffer curve is. The Laffer curve is primarily about concepts of elasticity and diminishing returns. In response you replied "This article should be about the social phenomenon and cultural history of the Laffer curve, not about the concept of elasticity or diminishing returns." That is a different article. Also, from your edits, which I understand you feel passionate about, and your comments further up, I believe you may be confused about the difference between supply side economics and the laffer curve and view them as the same. They are not the same, although the Laffer curve was used, in part, in the package of measures comprising supply side economics. Further, the attacks of prominent economists (including Krugman, who is very careful in the exact words he chooses) are generally not of the basic concept of the Laffer curve, which they almost all accept as sound, but rather on users/abusers of the curve who claimed that lowering taxes always increased revenues (the Time article claims former president Bush was one of them). That lower taxes always increase revenue is patently in conflict with what the Laffer curve really says, however many people believe that's what it's about. Another misconception is that governments are always trying to raise more revenue with tax cuts. That is not always their aim (indeed raising more tax revenue is not the primary aim of tax cuts in supply side economics). I think we have a great opportunity to sort out the many misconceptions which are propogated time and time again by politicised interests or the uninformed press. Hope that helps. Gnomatic (talk) 23:57, 10 December 2009 (UTC)

The Laffer Curve is a term that a few journalists used to popularize supply-side economics. They claimed that it described a concept that had already held a place in economic theory. By giving a new name to an old idea, they could ignore the academically accepted theory and pretend as if there were no complexities involved, allowing them to spend 30 seconds explaining to a congressman something he would spend 6 months talking about. The curve is nothing more than that.

Trying to remove "the social phenomenon and cultural history of the Laffer curve" from this article is known as a wp:content fork. When someone looks up a subject on wikipedia, the article they arrive at should give them the whole picture, not some vision sanitized by anyone.

I am not confusing the Laffer curve with SSE, I am saying that Laffer curve was initially used almost exclusively to promote SSE. The L. curve isn't a new concept, but a term invented by and for SSE. It should be presented in context. Krugman does attack the L. curve, calling it "crude and silly". But to him it's biggest sin is what it was created to advocate. This is not something that can be removed from the concept.

Your comment on what the L. curve "says" or does not say is lost on me... there is no way to quantify anything by the 0 and 100% taxation rate (and again, event those are merely theoretical), so it really doesn't "say" anything. But the idea that a peak exists is key to a lot of policy decisions which, again, should not be whitewashed from this article because there are lots of RS and Notable sources which explain the connection. Your attempt "to sort out the many misconceptions which are propogated time and time again by politicised interests or the uninformed press" are commendable, but--given the lack of sources which back you up and wealth of sources which support a critical view of the history of the L. curve--are also wp:OR.

I agree that we can help clear things up here. To that end, I suggest writing a very short section called "Laffer curve" in elasticity (economics) or diminishing returns, redirecting this page to that section, and moving the critical stuff to SSE, Reaganomics, etc, and creating all the appropriate cross links. Simple, neutral, solves your problems with negative attribution towards the L. curve, and solves my problems with this article appearing to be a content fork. What do you say? T34CH (talk) 01:47, 11 December 2009 (UTC)

The concept is indeed not a new one. But that doesn't make it invalid or uninteresting. I think merging it with elasticity is not the right thing - this is a specific case of elasticity which has an independent existence. Again, merging with SSE is not the right thing. Laffer curve != SSE.

"The Laffer Curve is a term that a few journalists used to popularize supply-side economics. They claimed that it described a concept that had already held a place in economic theory. By giving a new name to an old idea, they could ignore the academically accepted theory and pretend as if there were no complexities involved, allowing them to spend 30 seconds explaining to a congressman something he would spend 6 months talking about. The curve is nothing more than that.". This is your POV, but it is not the only POV. Regardless, it can be resolved with valid supporting references. Again if journalists did or didn't do something, that doesn't make the concept invalid or uninteresting. In fact it makes it more important to show how it really works.

It's clear that the Laffer curve is a theory, nobody can know the peak etc. (I would say it is known that a 0% tax rate will yield 0 revenue for sure though.) Laffer says it's a learning tool. The article is consistent with that. Many useful thing are theories (eg relativity) but theories can still provide useful insight.

One way forward would be to rename the article Tax Income Elasticity and have a redirect from Laffer curve. Then we could talk more generally about the theory, although of course the Laffer part would still probably be the biggest part. —Preceding unsigned comment added by Gnomatic (talk • contribs) 03:40, 11 December 2009 (UTC)

If, as you say, the idea was not a new one, then this isn't really a topic that can stand on it's own. What we can say is "The L. curve is a phrase coined in 1978 to help illustrate a need for the central policies of SSE." This is directly in-line with what Wanniski says. What I said about journalists is straight out of Krugman's book, so it's his POV, not mine. I'm not sure why you keep accusing me of arguing from a POV rather than offering sourced statements. I'm not here to present my theories in any shape of form.

I'm open to the idea of an article called tax income elasticity (or something similar), but I want to know more about why you think it needs to be separate from the main elasticity article... yes that article is a bit of a mess, but the purely theoretical information would make for a fairly short section, and the context of the over-arching concept could only help readers understand the topic. Also, I'm still not sold on how you see the concept of the L.curve (not "tax income elasticity") being seperate from SSE. Let's be very clear, I'm not equating the two, but the curve is a phrase and image created and popularized by SSE'ers to promote SSE, so they are intimately intertwined.

You said yourself we should split the theoretical from the application, so putting the theory in Elasticity and the application in SSE fits that criteria perfectly. Whether the main section on the Laffer curve is in Elasticity or in SSE (only need to have it once on WP), criticisms related to the L. curve should be in which ever section discusses application. I would suggest not having any application info or a section named Laffer curve in any purely theoretical article (links yes, sections no) as it would draw all sorts of POV pushing from all sides, simply by virtue of that name.

It's true that such curves are interesting thought experiments. It's also true that many of the shenanigans of the SSE'ers are not actually based on the L.curve. But many of the shenanigans were claimed to be based on the L.curve. When the curve is invoked prominently and their are notable criticisms of policies and actions ostensibly carried out because of the L.curve, it should be noted here (or where ever) so that readers have a full understanding. It's not a problem to explain the difference between theory and reality, but most readers are looking up this term because of what they hear in misinformed public forums, not what they read in academic journals, text books, or in conjunction with actual economics. T34CH (talk) 06:28, 11 December 2009 (UTC)

I do think that the concept of increasing tax rates having a diminishing return is interesting and useful enough to have its own article, and there is a lot of good material here. Maybe the way to handle it is to make the article more general, and spend quite some time noting that Laffer's was the most influential description and interpretation of the concept. Somehow that doesn't seem quite satisfying though. Gnomatic (talk) 12:11, 14 December 2009 (UTC)

What would you propose to call the article? It would need to be something that isn't a neologism.

Incidentally, I was looking at an economics text book (Barron's Economics, Wessels, 4th ed.), which states on p. 182 that the principles of SSE are "1) People supply less labor, capital, and other factors when taxes increase [sounds to me like "always decrease taxes, L. curve says so] 2) The decision to supply more or less of a factor is determined by the marginal tax rate (again, L. curve) 3) When the marginal tax rate goes up, aggregate supply goes down. The average tax rate does not matter. 4) This shift in aggregate supply is more important for predictiing what taxes will do than is the shift in aggregate demand." I really don't see how the L.curve and SSE could be any less tied together.

From here on out, could you please try to compromise on edits rather than just reverting everything? You and Bob keep reinserting a fact tag that has no business being there, and reinstituting redundancies that actually make the paragraph much harder to read. I don't pretend what I write is the ultimately polished version, but we should be working together on wording rather than simply reverting everything. T34CH (talk) 19:41, 14 December 2009 (UTC)

Yes! Your text book is absolutely right! The essence of supply side economics is that if one removes the impediments to the supply of goods and services, then the cost of producing things will go down. As a consequence, economic output will increase and the cost of goods and services will fall (making people wealthier overall). One of the impediments to the supply of labor is the marginal tax rate and therefore to maximise the labor supply one should lower the marginal tax rate as much as possible. There is not an optimal rate: in SSE one should always try to lower the tax rate.

But you have hit the nail on the head on why SSE and the Laffer curve are not the same. The objective function of SSE is to maximise supply, and to achieve this you should always try to lower taxes. The Laffer curve says there is a revenue-maximising point of taxation. In the Reagan years it was probably true that lowering taxes increased supply and also increased tax revenue (so the Laffer curve case for tax cuts and SSE case for tax cuts were in agreement). In later years, people argued that Supply Siders disingenuously used the Laffer curve argument for justifying further tax cuts, when all they really wanted to do was further SSE aims (ie the Laffer curve case for tax cuts and the SSE case for tax cuts were not really in agreement any longer). It's the thought of the latter that makes Krugman and others froth at the mouth. I really think this is a fascinating topic worth explaining clearly. Let's hope we can get it sorted. Gnomatic (talk) 13:18, 15 December 2009 (UTC)

Simple Mistake - Art Laffer's Name is Missing from the article

The only name mentioned in the entire article is "Laffer". His first name is never given, nor a link. Pretty glaring oversight. —Preceding unsigned comment added by 67.142.130.43 (talk) 22:34, 17 December 2009 (UTC)

1% GDP growth in the subsection "2005 US Congressional Budget Office (CBO) estimates of the effectiveness of tax cuts"

Hello, I was looking at this article and I noticed that, in the section referred to above, it says the CBO estimated GDP growth of 1%. Is that over 10 years? That seems a little pie-in-the-sky for just one year. If anybody knows the time period, it would be great if you could fix the article. Thanks.--Dark Charles (talk) 02:26, 25 April 2010 (UTC)

Verifiability issue: With respect to the notation about 70% being the likely optimal rate, there is an issue of verifiability. The author of the wiki page references the online "dictionary of economics", however the author of the definition of Laffer Curve on that site refers to "some studies" however does not freely refence which studies they are referring to. To me, this leaves their assumption open to debate without verifiable evidence. Oconp88 (talk) 13:36, 2 August 2010 (UTC)

In the section I mentioned in the title, it said that the Cato inst. objected to the study because the CBO assumed a 1% increase in GDP for a 10% tax reduction, but it never said over what period the economy would grow 1%. I checked the source, but there was no mention of the CBO or Congressional Budget Office in it... So I deleted the statement.--Dark Charles (talk) 00:25, 10 August 2010 (UTC)

Interesting Source

Hello guys, I'm not a regular Laffer curve editor, but I found http://voices.washingtonpost.com/ezra-klein/2010/08/where_does_the_laffer_curve_be.html#more and thought it might be of use to you. It gives a few estimates of where the vertex of the Laffer curve is.--Dark Charles (talk) 00:25, 10 August 2010 (UTC)

Adam Smith Institute Paper - 20%

I'm skeptical that a paper from the Adam Smith Institute ever counts as a reliable source, but in any case, if you're going to cite it you should limit yourself to what it says in the paper. First, the paper discusses only capital gains tax, and second, it says that part of the loss of revenue (how much remains carefully unspecified) from capital gains is due to property owners holding onto their property in anticipation of rates being lowered again later. It certainly does not claim that the Laffer Curve peaks at 20% for income taxes--in fact, it never even mentions the Laffer Curve.

I've adjusted the relevant paragraph to reflect this. —Preceding unsigned comment added by Dausuul (talk • contribs) 23:27, 23 September 2010 (UTC)

Other empirical data

The other empirical data section seems to need very much better sources.

The Hauser’s Law article is not scientific at all, but an essay published in Wall Street Journal. Probably there is real research behind the essay, and that should be referenced instead (the essay is not convincing).

Also the Laffer article is not scientific. In the Baltic countries and in Russia there are a lot of big changes involved. Laffer does not discuss these other changes at all in the referenced article (published by the Heritage Foundation, which like Wall Street Journal hardly can be seen as neutral).

I do not know the specifics in Ireland, but I think there has been big effects of capital moving in, where effects are not due to low taxes, but taxes being lower than in other places. Also the bubble should be examined before using that example.

--LPfi (talk) 16:32, 20 December 2010 (UTC)

—Preceding unsigned comment added by 86.174.8.225 (talk) 01:00, 16 February 2011 (UTC) 

Hauser’s Law is an observation. It's not scientific because it is merely an observation and is not empirically testable.

But that line of argument does not make sense because its trivial. If I observe that has been raining outside for four days... then that's that. It's not scientific, it's just an observation. Sugar-Baby-Love (talk) 22:12, 4 April 2011 (UTC)

criticism

There seems to be a need for adding more and clearer criticism, since many economists do not think that tax cuts increase incentive. If property was taxed 10%, would anybody stop working? Probably not. (Probably it will not be easy to write an neutral article due to very different opinions concerning this theory) —Preceding unsigned comment added by 80.121.20.135 (talk) 15:03, 24 January 2010 (UTC)

Good catch, and taken care of. Don't be shy of fixing such issues in the future (be wp:BOLD). T34CH (talk) 00:41, 18 December 2009 (UTC)

It is standard in economics that reducing the degree of redistribution reduces work incentives (where "work" may include investment). Who in particular disputes this? CSMR (talk) 02:41, 11 April 2011 (UTC)

Currently, there is NO CONTENT in the criticism section. C'mon guys. —Preceding unsigned comment added by Lubarsh (talk • contribs) 15:05, 10 February 2010 (UTC)

A criticism section is actually frowned upon. Criticism should be placed throughout the article where appropriate. Integrate it into the context in the proper section. Morphh ^(talk) 15:17, 10 February 2010 (UTC)

Quite so. And indeed many recent edits have been "move criticism back to main".Gnomatic (talk) 10:13, 11 February 2010 (UTC)

Extreme Value Theorem for Justification of the Laffer Curve?

In the introduction to the article there is a reference to the extreme value theorem, which is stated to be the mathematical justification of the existence of a maximum tax revenue on the Laffer Curve. While this is true, I believe that Rolle's theorem serves better to support the analysis behind the Laffer Curve. Not only does Rolle's theorem imply the existence of a maximum value on the Laffer curve, but it also labels it as a critical point. Hence, would it be appropriate to change the reference to this theorem instead? Thank you.

Komjdp (talk) 18:45, 20 November 2010 (UTC)

I don't think that would be wise. Functions need to be differentiable to use Rolle's theorem, which isn't at all obvious in our case.--Dark Charles 19:24, 20 November 2010 (UTC)

24.3.100.36 (talk)

TR = [(PD + GD) * (RINT + IRATE + df/dt + 1/L) - PGDP - dGD / dt] / [((PD + GD) * (RINT + IRATE) + NI)]

TR = Tax Rate

PD = Private Sector Debt

GD = Government Debt

RINT = Real Interest Rate

IRATE = Inflation Rate

df / dt = Combination of population growth / technological advance over time

L = Leverage (Outstanding debt / equities)

PGDP = Personal Consumption Expenditures + Business Investment + Exports - Imports

dGD / dt = Change in government debt over time

NI = Non Interest Income

Your debt stabilizing tax rate is found by setting dGD / dt to zero

TR = [(PD + GD) * (RINT + IRATE + df/dt + 1/L) - PGDP] / [((PD + GD) * (RINT + IRATE) + NI)]

There is currently a section "Productivity and tax rates" that contains formulas like this. It's hard to tell if it is nonsense. At any rate it is completely unexplained, and its connection to the main theme is also unexplained. I would recommend deleting, unless there is anything useful in it that can be extracted, condensed, and explained. CSMR (talk) 02:57, 11 April 2011 (UTC)

The Laffer curve tries to identify the tax rate at which the federal government collects the most revenue. There is really only one justification for the federal government to maximize it's revenue stream - For a given level of spending this reduces the amount of debt it must issue to finance the difference. Notice that the rationale for the Laffer curve is fundamentally different than the rationale for supply side tax cuts. True supply side tax cuts are intended to reduce the cost of production resulting in an increased supply of goods, ie. they are intended to be deflationary. The equations above try to identify what the tax rate needs to be to set the change in government debt to zero (revenue maximization). The equations that were under the section "Productivity and tax rates" demonstrated how tax rates affected productivity - meaning how supply side tax policy works to deflate prices.

Section on incarceration rates and crimes

In this article there was a section with text:

"Outside of economics, American journalist Reihan Salam has argued in National Review Online that Laffer curve also exists with respect to incarceration rates as punishment for crimes. He stated that past a certain point in which more and more of the population have been or are currently in prison, incarceration becomes more destigmatized and crime would actually increase."

There is no relationship to the Laffer curve, except that they are both curves that go up and down. There is also a Laffer curve for the height of a ball when you throw it in the air. The journalist probably didn't understand the Laffer curve or wanted extra publicity from the association. Section deleted. — Preceding unsigned comment added by CSMR (talk • contribs) 02:51, 11 April 2011 (UTC)

You are simply factually wrong. Read the article. He explicitly makes the comparison. It's not that there are curves that just up and down. It's a matter of a common ideological theory behind them both. Sugar-Baby-Love (talk) 04:51, 11 April 2011 (UTC)

Effective and base corporate tax rates

Hello, there have been some additions to the article regarding the maximization of corporate tax rates. I think the edit was somewhat confusing because it doesn't explain if it's talking about effective rates or the base rate on the books (the top marginal tax rate being 35% in the US, if I recall).--Dark Charles 01:01, 4 May 2011 (UTC)

Reverse Laffer Curve section not about the Laffer Curve

The section titled "Reverse Laffer Curve" is not about the Laffer Curve. Just because Paul Krugman writes a single BLOG POST saying, "there is a kind of Laffer curve in which more is less and less is more" doesn't mean it rightfully belongs in an encyclopedia article. Can anyone find a mention of the "Reverse Laffer Curve" in any economics textbook or journal article anywhere? I highly doubt it. The term "Reverse Laffer Curve" was made up by a Wikipedian. Paul Krugman is right on the facts, but it more appropriately belongs in an article on Keynesian economic theory. --JHP (talk) 09:28, 2 August 2011 (UTC)

I'm not sure if your objection is that it's a blog post or if it's because it's not about the Laffer Curve. If it's the latter, you are simply factually incorrect. He explicitly makes the comparison, and it has much more relevance to this article than the section about incarceration rates.Aapter (talk) 13:25, 8 August 2011 (UTC)

JHP you are right. This section has been deleted because:

- Krugman's blog article has nothing to do with the Laffer curve. The Laffer curve is about Taxable income elasticity (the relationship between tax rate and tax revenue raised) and Krugman's "Conscience of a Liberal" blog post is about government spending in a depressed economy when rates are close to zero. These are unrelated. Arthur Laffer's name is mentioned in a throw-away context. The Laffer curve is not mentioned.

- The term "Reverse Laffer curve" is OR and not used or even implied by Krugman.

Other points about this paragraph:

- The citation is a blog.

- The use of the phrase "Nobel Prize winning etc" in this context implies that Krugman's blog posts are of Nobel prize winning notability. This would seem unlikely.

Incidentally, I think the incarceration one should go too.

Gnomatic (talk)

Maximum

Says the article: "If both a 0% rate and 100% rate of taxation generate no revenue, it follows that there must exist at least one rate in between where tax revenue would be a maximum."

I think this is not worth mentionning (isn't that obvious? what does that imply?), and misleading: it's not because 0% and 100% rates generate no revenue that there is a maximum; it's because no rate can generate infinite revenue.

Am I completely missing something? Palpalpalpal (talk) 11:31, 3 September 2011 (UTC)

The "Laffer curve" is just the Extreme Value Theorem of calclus applied to a postive, real, continuous function, zero at the endpoints. — Preceding unsigned comment added by 68.115.78.176 (talk) 00:58, 17 October 2011 (UTC)

The graph represented is, IMHO, misleading respect to what is correctly said in the text: there exists infinite numbers of functions satisfying the definition. Another graph would be nice to have. — Preceding unsigned comment added by 85.46.187.130 (talk) 16:45, 23 September 2011 (UTC)

I've moved a graph up from the text. LK (talk) 10:33, 22 December 2011 (UTC)

The article does not mention that the function must be continuous in order for Rolle's theorem to apply. It is not necessary that the function is continuous. Also bounded function might not have maxima and minima unless the domain is compact and the function is continuous. — Preceding unsigned comment added by 174.252.136.205 (talk) 22:49, 28 December 2011 (UTC)