03/03/10

Don't Tax Me Bro'

Our pres__ent (the one with no id) allegedly went to law school and learned all about Constitutional Law, although that story sounds really suspicious since he seems to have no idea what the Constitution says and no respect for what it represents. He obviously didn't ever take any college-level finance or economics classes. It really shows.

In my case, after the Vietnam war ended and it looked like my chosen career of using violence to bring freedom to the world had lost its cachet, I decided to get an MBA. I figured with my undergraduate degree in Philosophy from the Seminary and my Intelligence and Special Operations experience from the war, an MBA would set me up for a career in the fast paced field of international gun-running or as a drug-lord, money-launderer, or similar lucrative position.

Well, first I found out that there were so many undergraduate prerequisites for entry to an MBA program and so few of them were filled by a philosophy degree, that I just went ahead and did course work or tested out of a complete 120 hour second bachelor of arts. I also found out that those careers I was looking at were frowned on by the authorities, and would cause me to lose my security clearance and my Air Force Reserve (waiting for the next war) job. But I went to MBA school anyway. Which is a long way of explaining why I believe I know more than the pres__ent about the economy.

When I was in grad school in the late 1970s, one of the popular topics was the Laffer Curve, named after Arthur Laffer. You can read about it at the link to Wikipedia, or Google "Laffer Curve" and find much more information. It boils down to the idea that there's a bell shaped curve of revenue collected along a scale of tax rates. If you charge 0% you collect no taxes of course, but if you charge 100% you also collect no taxes because nobody will work if you're taking all their pay from them. Some where along the scale is a sweet spot where you are charging just the right tax rate to maximize tax revenue. Lower the rate and you're losing money you could have collected, raise the rate and you're causing some people to earn less income so it won't be taxed.

Of course, in real life there are other variables involved too, like if you've already fraked-up the economy so bad that over 20% of the workforce is unemployed or underemployed. The effect on net tax revenue looks something like this:

Direct your attention to the February 2010 column at the far right. That figure is the lowest it has been in a very long time and it would appear that the recession is not quite over yet. You can probably guess as well as I can what obuma and company will do when they see the drop in tax revenue. (Hint: Tax Hike)

Go back and read the articles about the Laffer Curve. When you get done, give yourself a pat on the back. You now know more about the economy than the pres__ent and his entire cabinet.