The financial world we live in is just as wild, if not more, than the mountains and woods we walk through. We are told that the fundamentals of our economy are strong, but we can feel that something is wrong. My unique financial background and survival passion make Financial Survivalist and excellent place to learn and share.

Monday, September 10, 2012

Laffer Curve: Why Raising Taxes Won't Balance the Budget



The Laffer Curve is a principle that at some point tax revenues begin to decrease as you increase tax rates. The reason is that income is the incentive to work and make more money. The more the government taxes, the less incentive there is to work and make more money.

You might think, "But people need money?" or "A little money is better than no money!" But the Laffer Curve is economic fact. The only question is at what tax rate does tax revenue begin to decrease?

According to the research done by some of the countries most influential LIBERAL economist, that rate is 33%. Raising taxes above 33% will actually decrease the governments tax revenues. Therefore, raising taxes on the rich WILL NOT balance the budget. In fact it will DECREASE tax revenue and increase the deficit. 

However, the people in the country that are currently paying less than 33% may be taxed more in order to increase tax revenues. In fact a flat tax of 33% may maximize the possible tax revenues of the government. Though I am an advocate of a flat tax, I am also an advocate of decreasing expenses and would prefer a flat tax closer to 20%.

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