Tuesday, August 10, 2010

12 economists answer "Where does the Laffer curve bend?"

And there seem to be more answers than answerers. Take Greg Mankiw (to whom Tyler Cowen awards the "Best Answer" prize):
My guess is that that the short-run answer and the long-run answer are quite different. For example, if you raised the top rate from 35 to, say, 60 percent, you might raise revenue in the short run. Over time, however, you would get lower economic growth, so the additional revenues would fall off and eventually decline below what they would have been at the lower rate.... I will pass on offering a specific number, as it would require more time and thought than I can offer just now, but I will opine that I think the long-run answer is actually more important for policy purposes than the short-run answer.

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