If there is no positive or negative economic impact on lower taxes… then it seems like that in itself is a positive. So, why should be be paying more rent just to live on earth?

Reagan raised taxes in his 2nd term; Bush I raised taxes — he got voted out, but the economy was already in an upswing — if the election was 3 months later, he might have won. and Clinton raised taxes.

Too much in the way of tax hikes oppress growth; too little taxes cause deficits. The happy medium is ideal.

Unfortunately, the idealogue/doctrinaire tax cutters donot understand that; On the other side, neither due the spending whores in Congress.

“What are the economic impacts of tax INCREASES on subsequent revenues for governments?”

Also, the question demands full context for all the variables involved–how is the impact changed by where the tax changes are implemented (i.e. corporate, personal, etc.)? Which supply side cuts, if any or all, borrow growth? Do ALL tax cuts result in borrowed growth or is it just the current combination of tax vehicles?

The timing is key to the cycle expanding or fading . . .

The relevant question is – is the government more effective at using the marginal dollar to boost long term growth or is the private sector? If so, we are better off with higher taxes, if not we are better off with lower taxes.

Obviously, if the government controls almost everything as happened east of the Berlin Wall, the government is probably not going to be more efficient at the margin. But if the government is too small, you don’t have the spending on infrstructure, etc., that is also necessary for growth. A number of Northern European countries have much higher tax rates than we do and some do quite well. (The GDP per capita in Luxembourg is higher than ours – I think so is Norway’s and perhaps Sweden’s and Finland’s as well.)

The fall of the Berlin Wall doesn’t mean that the Norwegians are doing it wrong, any more than the mess in Somalia indicates that cutting taxes in the US is a bad idea. Somewhere along the line, there is happy medium, and it may even be that the happy medium is closer to Norway than it is to the US. (And it may be that there are cultural norms adjusting that happy medium.) Every year my students seem to find that that’s what the data says for some reason.

While one can certainly find anecdotal information about private sector failings, in government they are legion as even a cursory examination of a farm bill, transportation bill or energy legislation will prove.

How should we interpret relative velocity of money then? Are proponents of social safety nets correct when they aver that assuring poorer citizens have more money inevitably increases economic activity because they must turn it over faster (can not hoard) and do not spend it abroad? Is the assertion correct that universal health care coverage would reduce the cost of doing business in the US?

I actually have far more suspicions than answers but the larger suspicion is that a number of factors, including the growing disparity between the owners of capital and everyone else in the US, are telling us something we must assess honestly and interpret correctly; i.e., if ALL the relevant numbers fail to confirm a theory’s predictions then that theory must either be modified or abandoned. Simply coming up with a bunch of auxiliary theories that say you should only look at these numbers this way or that the numbers are really saying this rather than that is only a mechanism for protecting the core assumptions required by a specific ideology underlying the central theory: It is impossible to make progress that way.

So, even if both sectors are equally inefficient with the average dollar, one of the sectors will be more inefficient at the margin. It may well be, because the government is relatively small in the US (compared to similarly developed countries) relative to the private sector, that the government spends its marginal dollar in a way that is more likely to boost the long term wealth of the country more than the private sector. That would certainly go a long way toward explaining why the Laffer curve doesn’t behave the way Laffer or the Reagan or this administration believes it “should.”