Laffer Curve Essay

8316 Words Nov 17th, 2011 34 Pages
Supply-Side Investment Research
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By Arthur B. Laffer The story of how the Laffer Curve got its name isn’t one of the Just So Stories by Rudyard Kipling. It began with a 1978 article published by Jude Wanniski in The Public Interest entitled, “Taxes, Revenues, and the ‘Laffer Curve.’” As recounted by Wanniski (associate editor of the Wall Street Journal at the time), in December of 1974 he had been invited to have dinner with me (then professor at the University of Chicago), Don Rumsfeld (chief of staff to President Gerald Ford) and Dick
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At the end of the dynasty, taxation yields a small revenue from large assessments. A more recent version of incredible clarity was written by none other than John Maynard Keynes: When, on the contrary, I show, a little elaborately, as in the ensuing chapter, that to create wealth will increase the national income and that a large proportion of any increase in the national income will accrue to an Exchequer, amongst whose largest outgoings is the payment of incomes to those who are unemployed and whose receipts are a proportion of the incomes of those who are occupied, I hope the reader will feel, whether or not he thinks himself competent to criticize the argument in detail, that the answer is just what he would expect—that it agrees with the instinctive promptings of his common sense. Nor should the argument seem strange that taxation may be so high as to defeat its object, and that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance than an increase of balancing the budget. For to take the opposite view today is to resemble a manufacturer who, running at a loss, decides to raise his price, and when his declining sales increase the loss, wrapping himself in the rectitude of plain arithmetic, decides that prudence requires him to raise the price still more—and who, when at last his account is balanced with nought on both sides, is still found righteously declaring that it 2 would have

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