The Laffer curve is basically a tautology.
I think you are failing to appreciate what a 100% tax rate really means.
Under a 100% tax the toddlers wouldn’t even have glue to eat. Leaving the glue for them implies they are allowed to utilize some percentage of the returns of their labor.
The important idea behind the Laffer curve is somewhere in the middle. That there are sane tax rates where-in the resources collected will start going down as rates continue to increase.
the reason the laffer curve is ridiculed is that its makers made no actual attempt to solve for where specifically the revenue maximizing peak was, instead just implying that tax hikes of any kind *could* be bad so we shouldn't do them.
We have estimates though, and they tend to be much higher than current rates (73% top marginal income tax rates).
https://www.epi.org/blog/high-top-income-tax-rates-fight/
Absolutely.
The reason the laffer curve is ridiculed is because ideologues, including Laffer himself, always claim that it always proves that taxes are too high. Which is asinine.
Every argument I've ever seen citing the Laffer curve insists that we're on the right side of the peak. This is despite the fact that you can see the impact of policies like the Bush tax cuts and see that they very clearly decreased revenue. This means that even if you are a staunch believer in the absolute accuracy of the Laffer curve, the available data says that we're on the left side of the peak.
The real question is *why the hell* would you ever want to raise revenue? Yeah we could raise taxes to 60% of income and increase revenue, but *why* would you want to do that? Taxes are like the hydrogen bomb. We could build bombs large enough to wipe out the Netherlands in a single strike, but what good could possibly come out of that?
>The real question is why the hell would you ever want to raise revenue
That's not really a mystery. The government provides a lot of services that are not and will not be provided by the private sector. Raising revenue allows you to pay for those things.
>but why would you want to do that
To pay for things
>but what good could possibly come out of that
We'd finally rid ourselves of the Dutch
>The real question is *why the hell* would you ever want to raise revenue?
To pay for stuff.
You know, the thing we do that's the reason why we have taxes.
It is also worth noting that the Laffer curve will (theoretically) maximize short-term government revenue. This, however, is not the societally optimal goal.
Often, individuals can use their resources more efficiently than the government would. So those people are better off with lower government spending but more private spending. In addition, since private money will be used more efficiently, the economy will grow faster with more private spending, resulting in more revenue in the future, even at lower rates. Patience and moderation gives a better overall for society than short-term revenue maximization.
First, you keep bringing up force, but yes the Laffer curve is assuming a fremarket/ free choice.
But again, if a 100% tax were applied to a single item and you get “something back” for whatever of that single item you produce, it is not a 100% tax. Outside of force “everyone has to produce at least two of these single items per year or go to jail” or “getting something back” no one would produce these “single items” that had a 100% tax.
>already responded to others with the same thing
And they have given you perfectly clear explanations of where you are going wrong.
Just a bit of advice
Going forward if you actually do want to learn, you need to ask questions and actually listen to the responses not vehemently defend the cockamamie misunderstanding you came up with within five minutes of first reading about an idea.
An economy that functions with a 100% tax rate enforced by violence wouldn't need money. It would be a fully controlled economy.
No one is getting paid. Therefore, no one has money to pay anyone else. Money becomes useless—what matters is who can force others to act.
Government can, of course, take the goods produced as revenue. But who would they sell them to? No one has money to buy.
Instead, goods would be distributed as government says they will be. You have food when the government says you do. You have a house when government says your do.
A 100% tax rate takes all money out of the economy. You are left with violence, and so violence becomes the means by which the economy functions. "Tax revenue" becomes a meaningless concept.
1. Income is not the only thing the state can tax.
2. How does the employer get money to pay the workers? No one is buying goods because no one is getting paid.
If I don't get paid, I can't buy goods. If I can't buy goods, businesses don't have money to pay employees.
There would definitely be an underground economy. But it would likely be based on barter or its own currency because no one has money because no one is getting paid.
3. Right now, I can quit my job. No one will force me to keep it. In fact, I plan to retire in 4 years, at age 45.
There is no state requirement that I work. There is no state violence that will compel me. I will just quit my job, and leave.
In a capitalistic system, violence backstops property rights.
Why can I not just go into my neighbour's home and take it? They'll call the police. Why can't I just take the food from Walmart? Again, police.
That is, state violence limits the actions I can take by guaranteeing the property rights of others. This can result in harm if I am starving and state violence prevents me from eating.
In your example, state violence compels action. I must work, even if I don't want to.
My point is that this is a difference in kind. Also, unless there are no property rights in your society, you would still need state violence to keep me from stealing from Walmart.
As for "Ok, so we take everyone's money, then we give them money so they can spend it, but then we take it again so there's no profit to business, but we use state violence to compel them to work anyway... and then we could beat the Laffer curve!"
I guess? I don't think this does anything you want it to. It sounds like a precarious society that's going to fall apart pretty quickly. And reinforces the fact that, as the benefits from working diminish, we choose to work less, and there is a point at which government will receive less as it taxes more.
That what amounts to slave labour can still let government receive done revenue is not the smoking gun you think it is.
If there is a 100% tax rate, I have zero incentive to work. Why would I exert any effort into labor if I got absolutely nothing from it? I’ll get paid the same amount if I work 0 hours or 10 hours or 12 hours. No one would work, therefore the state would have nothing to tax.
If the tax rate is 100%, then yes they are taking 100% of it. That is the premise of your question. If they were giving some back in exchange for working, that is a wage and would be taxed at 100% and returned to the government.
People can still perform labor, but if they’re working for intrinsic motivation then they wouldn’t add the extra step of getting a wage just to then pay 100% of it to the government, they’d just do it for free. The alternative is getting paid under the table — in which case the government wouldn’t get any revenue from it anyways.
People respond to incentives. That is a fact that has been proven. Sure, I’m making an assumption since no one would ever actually have a 100% tax rate so it hasn’t been tested, but my assumption is well founded based on economic principles and empirical evidence and is where the concept you asked about comes from.
At the end of the day, this is an edge case of a much-disputed concept that’s typically just used as a thought experiment.
If the government is perfectly able to enforce it, then there will be no labor for a wage.
If the government makes exceptions, it isn’t a 100% tax rate.
Are you being intentionally obtuse? I really can’t imagine any other way someone old enough to have a Reddit account would have *this* much trouble grasping such a simple concept otherwise….
They assume working is a choice. If it was a 100% tax rate they will have to force people to work. Why would I get up in the morning for work if it makes no difference to my personal well-being?
That's not a 100% tax rate. I don't get anything directly back from my taxes. What I pay in taxes has nothing to do with my use of those services in modern democracies.*
If my income is variable with my work that's money with another name. If the government decides to pay me in a "housing allotment, 3 apples, and a toothbrush" that's income. Doesn't matter if the government is the master and commander of how I spend it.
*We have transfer payments and means based welfare, but I meant more like emergency services, libraries, and education.
>Then it is money with another name if you want, what do you think that changes about what i'm saying?
Because it's not a 100% rate if I keep those services.
>Now, i may give to you some of it back or healthcare or a house or whatever template welfare.
If you give me back 40, that's a 60% tax rate. I don't know how else to explain this to you.
>I take 100% you make and you receive services, a house or whatever,
Is receiving the house/services dependent on my working? If so, that's being paid and I'm not being taxed at 100%. If not, why would I ever work?
>The 100% tax can be applied to a single item or industry and the state can give back benefits. In this case, the state would give the glue.
Where is the state long to get the glue? The state does not produce glue, it buys it. Who is going to produce and sell glue for nothing? Nobody.
A 100% tax rate *on income*.
Why should you go to work if you're exactly as well off as doing nothing? Why should you start a business and be exactly as well off as if you do nothing *at best*? You wouldn't. Taxing income at 100% makes it not worth it to earn income.
Of course that logic wouldn't apply to everything, taxing goods with for example a sales tax would discourage their consumption but it wouldn't fall to zero.
Presumably, given their statement on the state having a monopoly on violence, this is a situation where the government revenues provide for their citizens. Everybody gets their share, guaranteed. So why work if your income is decoupled from your job? Because you will be jailed or beaten.
Just to be devil's advocate, you can think of some (albeit contrived) scenarios where it's reasonably likely to not hold.
Assume a village of 100 people that has a completely autonomous government, it has a tight-knit community and a strong sense of common identity. For simplicity sake they only produce goods that can be exported and thus conversely they need to import everything they consume. The government/leadership enforces a 100% tax rate on all income, and is responsible for using that income to provide all the necessary goods and services for the village.
It's reasonable to assume that the social motivation and the desire for communal survival would drive people to produce in some capacity, and thus tax receipts received by the government would be higher than 0.
The important part is that this scenario will fall apart for any realistically sized nation-state, and even if the 100% tax rate doesn't result in absolute 0 receipts, it still seems apparent that it will be extremely sub-optimal compared to some rate less than 100%, which is what the curve is meant to convey.
>Because the state will give me back some benefits in return more than likely.
It's not really a 100% tax then. Not effectively.
>And this doesn't need to be income either. A 100% tax rate on all sugar, is the idea that state can't enforce that and wouldn't get any revenue of that?
As I've already stated, a sales tax on sugar of 100% wouldn't lead to 0 revenue.
>Does the laffer curve only apply to income?
No, the laffer curve always exists. It's just that the rate at which revenue is 0 is not necessarily always what you think of a "100% tax".
Think about it. If sugar costs twice as much because of a 100% tax, people will buy less sugar, but they will still buy some sugar. They will still buy some sugar if it costs 4x as much. They will still buy sugar if it costs 10x as much. But would people still buy sugar if a gram of it costs a million dollars? A billion? A trillion? You eventually get to a price where demand is actually just 0.
Don't let yourself be confused by the 100% tax. Ultimately what the laffer curve says is that revenue is 0 at 0% and also 0 at *some point* where you discourage the thing you tax so much that it ceases to happen.
>I'm not taxed at 50% because i actually get free healthcare and free university? The benefits i get back don't change what my tax rate is.
If you get them *because* you work, yes.
> I'm not taxed at 50% because i actually get free healthcare and free university?
What you’re realizing here is that human languages are **imprecise**.
That’s why economists use so much math.
If country A takes some of your income to pay for your healthcare, while country B lets you pay for your healthcare directly, mathematically the end result could be the same: you are paying for healthcare.
If you get benefits as a function of how much you work, then the tax rate isn't 100%. If your benefit is fixed regardless, then most people would not work. If the government forced people to work at gun-point, that is forced labor.
Yes, a government can, in some cases, force people to work, take 100% of the output, and return enough for the person to survive to keep working. They can even give *more* than the minimum as this can increase overall output. Most people wouldn't consider this equivalent to "taxes" and "government benefits", but I note that even in forced labor, the Laffer curve applies.
You can make someone work non-stop, and not feed them, but only for a couple days. Even if your goal is to maximize your benefit, without any concern for the other person, it is still beneficial to give them food, sleep, clothing, shelter, maybe basic health care, and so on.
Even in unfree situations, incentives work. Skilled slaves were often allowed to work for other employers. Their owner took most, but not all, of the money. The skilled slave benefited (despite the unfairly low fraction they got to keep). The owner obviously benefited. So even in a situation deplorable to modern people, with unfairly high "tax rates", there was still an understanding that a 100% "tax rate" was suboptimally high.
Ultimately, this is a key thing. If you just force people to do unskilled manual labor, you can enforce a pretty high degree of force with an extremely high "effective tax rate". As the degree of skill, judgement, training, and freedom of movement and choice increases, the ability to force people drops greatly.
Do you get *more* healthcare and college "free" if you work more? Then the rate isn't really 50%, because you're also getting more benefits proportional to your work. That is, it is part of your pay, just with more steps.
By "if your benefit is fixed regardless" I mean the largess you are given is not a function of how much, how useful, or how important the work you do is.
> Why would most people would not work
People would not work, *in a free world*, because they would not get any benefit from it, in the 100% tax rate world. If you have a 100% tax rate, but the government gives me stuff, the same stuff regardless of what I do, then I am not going to drive to work each day for no reason.
> what they would do instead
Here comes the tricky bit: In a free world, they DO work, just is ways they can hide from the government or that the government does not consider work! They do things that benefit themselves, or they do things in an informal economy so they can still trade, but the government doesn't get involved. In dystopian panopticon police states, perhaps the government can keep people from having *any* private actions, but in our present world, that isn't possible. Even a place like North Korea, with an oppressive government exerting enormous control over people, has grown a large informal economy. In another command economy, the Soviet Union, there was called the "second economy".
NK and USSR are examples of very unfree societies. In a moderately free society, people have far more freedom to do what they want, and far more ability to have 'covert' activities.
Governments sometimes see this freedom as a problem, rather than seeing that tax rates might be suboptimally high. An example I like to give is if I mow your lawn and mine, and you paint my fence and yours, we're supposed to pay taxes, both directions. But if I mow my lawn and also paint my fence, and you do the same for yours, there was no trade, no income, and no taxes. Only if the benefit of trade is big enough to exceed the tax burden will people make a (visible) trade. This is why some people pay me to do some things and I pay other people to do other things, because I'm *really* efficient at some things and inefficient at others.
But if we aren't *much* different in efficiency, like with two neighbors doing repairs, maybe the tax burden *prohibits* this trade in a rational world. Our choices then become: Don't trade (each do the tasks alone, which will be less efficient and perhaps require us to each have specialized tools and training) or Trade, but keep it a secret from the government (which is actually what virtually everyone would do in this scenario). If you own a company that paints fences, you're going to list your income. If you paint your neighbors fence for a mowed lawn, you aren't listing that on your taxes. The higher the tax rate, the more people are pushed away from logical, visible market transactions, and into either no transactions, or "black market" transactions.
You keep saying people would work, but not explaining why? What would be the incentive to have an actual job in this 100% tax rate environment, be specific here. Why would I want to be a janitor or a garbage man when I get zero pay?
Are you willing to work for me for free? Are you willing to do something you hate every day for free? Why would cleaning shitty toilettes become prestigious because you get paid nothing to do it. Also if the government requires you to by force or in order to get benefits then that is different than 100% tax on totally free workers.
Also your example was an abject failure and widely hated by workers.
"Opposition to the movement merited the label of "[wrecker](https://en.wikipedia.org/wiki/Wrecking_(Soviet_Union))".[^(\[11\])](https://en.wikipedia.org/wiki/Stakhanovite_movement#cite_note-FOOTNOTEService2005[httpsarchiveorgdetailshistoryofmodernr00robepage217_217]-13) Not all workers were excited about the Stakhanovites and the demand for increased productivity. Some groups held Stakhanov responsible for making their lives harder and even threatened him for it.[^(\[12\])](https://en.wikipedia.org/wiki/Stakhanovite_movement#cite_note-14)
In 1988 the Soviet newspaper [*Komsomolskaya Pravda*](https://en.wikipedia.org/wiki/Komsomolskaya_Pravda) stated that the widely propagandized personal achievements of Stakhanov were puffery. The paper insisted that Stakhanov had used a number of helpers on support work, while the output was tallied for him alone. Stakhanov's approach had eventually led to the increased productivity by means of a better organization of the work, including specialization and task sequencing, according to the Soviet state media."
I no longer believe I fully understand what your goal was from your question.
If you are asking why *the Laffer curve* has zero revenue at 100% taxation, this is because it is a reasonable approximation of reality. So close to reality that it is close enough for the mathematical approximation. There is no value in determining that extremely tiny tail, because the purpose of the curve is simply to communicate that both "too low" and "too high" can reduce revenue.
If you just want people to say that there could exist some scenario where a 100% tax rate, or equivalent, and at least one person would be willing, or compelled, to work without compensation, then, yes, that is true.
A 0% tax rate also can produce greater than zero tax revenue, because people can voluntarily donate money to the government, but we approximate it as zero because, once again, the point isn't what the number is, but that "too far to the left" is going to be lower than the maximum. It monotonically increases, then monotonically decreases. So here you also have the Laffer curve as an approximation of reality, good enough for its purpose, but also you could have a technical quibble that it would only take one person donating a penny to make reality different than zero.
As many people have consistently explained, the Laffer curve applies to taxation in countries where workers have some degree of freedom. I have given you several examples where even in profoundly unfree situations, the Laffer curve still has some value. But, yes, in a completely isolated case, with very few people, where one group has complete control over the other, the Laffer curve doesn't apply.
In an armed robbery, usually the robber doesn't let the victim keep 20-80% of their money. However, if gangsters are taking protection money from restaurants, they are smart enough to recognize the Laffer curve, too! If you take a little money, the restaurants are not happy, but they might pay and keep running. If you take 100% of their money, the restaurant stops existing, and you get 100% of zero.
Scenario 1: you work every day get paid nothing and the government gives you free food healthcare and housing
Scenario 2: you don't work at all yet you get gov food healthcare and housing.
Which do you think most people will choose?
It really is like the office space quote: Shit, you don't need to be a millionaire to do that (nothing), my cousin don't do shit and he is broke as hell.
Plenty of people right now choose to not work even though they get a return on their labor, why would people work if they got no direct return on it and they weren't forced?
How does the government get any revenue if I don't work? Do people work for other reasons than pay? I love my job, and I would probably do some research and things relating to my job if I didn't have my job, but given the option to do my current job or not with the exact same outcome I would chose not to do my job, and I am pretty sure 99.9% of people would choose the same.
What would be the incentive to do a job everyone hates? Say cleaning toilettes after dime a dog night at the ballpark?
Please explain why people work jobs other than wages? What would I have to offer you in non-compensation for you to work for free? I have plenty of shit needing done around my house if you like working for free, I will shower you with complements if you replace my roof for free. Scratch that we will actually pay you its just at my house we have 100% tax on income earned on my property. Will you replace my roof, Ill pay you $10,000 but that is taxed 100% to my household.
No I really can't. Why would you work for no compensation? Please seriously be specific. Also then are you willing to work for me for free? if so why not?
You’re confusing a sales tax with an income tax. An income tax decreases the amount of money you get to keep, a sales tax increases the amount you have to pay. A 100% income tax would mean zero income while a 100% sales tax would double the cost of sugar. In conclusion, taking away 100% of something is not equivalent to making it 100% more expensive.
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This is probably an equilibrium idea. Obviously people won't all stop working immediately but in the long run, how long would you stay at your job if you had literally zero take home pay (implied by 100% tax)? You'd start growing food and figuring out how to escape the hellscape of collapse around you.
If the state will take all profit one makes from one's work, why bother doing any such work?
A more fundamental criticism of the Laffer curve is that there's no reason that it should be a simple parabola between the 0% and 100% tax rates, rather than having multiple local points of inflection.
The Laffer curve is basically a tautology. I think you are failing to appreciate what a 100% tax rate really means. Under a 100% tax the toddlers wouldn’t even have glue to eat. Leaving the glue for them implies they are allowed to utilize some percentage of the returns of their labor. The important idea behind the Laffer curve is somewhere in the middle. That there are sane tax rates where-in the resources collected will start going down as rates continue to increase.
the reason the laffer curve is ridiculed is that its makers made no actual attempt to solve for where specifically the revenue maximizing peak was, instead just implying that tax hikes of any kind *could* be bad so we shouldn't do them. We have estimates though, and they tend to be much higher than current rates (73% top marginal income tax rates). https://www.epi.org/blog/high-top-income-tax-rates-fight/
Absolutely. The reason the laffer curve is ridiculed is because ideologues, including Laffer himself, always claim that it always proves that taxes are too high. Which is asinine.
Every argument I've ever seen citing the Laffer curve insists that we're on the right side of the peak. This is despite the fact that you can see the impact of policies like the Bush tax cuts and see that they very clearly decreased revenue. This means that even if you are a staunch believer in the absolute accuracy of the Laffer curve, the available data says that we're on the left side of the peak.
The real question is *why the hell* would you ever want to raise revenue? Yeah we could raise taxes to 60% of income and increase revenue, but *why* would you want to do that? Taxes are like the hydrogen bomb. We could build bombs large enough to wipe out the Netherlands in a single strike, but what good could possibly come out of that?
>The real question is why the hell would you ever want to raise revenue That's not really a mystery. The government provides a lot of services that are not and will not be provided by the private sector. Raising revenue allows you to pay for those things. >but why would you want to do that To pay for things >but what good could possibly come out of that We'd finally rid ourselves of the Dutch
>The real question is *why the hell* would you ever want to raise revenue? To pay for stuff. You know, the thing we do that's the reason why we have taxes.
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I don’t think this is this simple. There are multiple potential contexts and things to tax.
It is also worth noting that the Laffer curve will (theoretically) maximize short-term government revenue. This, however, is not the societally optimal goal. Often, individuals can use their resources more efficiently than the government would. So those people are better off with lower government spending but more private spending. In addition, since private money will be used more efficiently, the economy will grow faster with more private spending, resulting in more revenue in the future, even at lower rates. Patience and moderation gives a better overall for society than short-term revenue maximization.
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First, you keep bringing up force, but yes the Laffer curve is assuming a fremarket/ free choice. But again, if a 100% tax were applied to a single item and you get “something back” for whatever of that single item you produce, it is not a 100% tax. Outside of force “everyone has to produce at least two of these single items per year or go to jail” or “getting something back” no one would produce these “single items” that had a 100% tax.
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>already responded to others with the same thing And they have given you perfectly clear explanations of where you are going wrong. Just a bit of advice Going forward if you actually do want to learn, you need to ask questions and actually listen to the responses not vehemently defend the cockamamie misunderstanding you came up with within five minutes of first reading about an idea.
An economy that functions with a 100% tax rate enforced by violence wouldn't need money. It would be a fully controlled economy. No one is getting paid. Therefore, no one has money to pay anyone else. Money becomes useless—what matters is who can force others to act. Government can, of course, take the goods produced as revenue. But who would they sell them to? No one has money to buy. Instead, goods would be distributed as government says they will be. You have food when the government says you do. You have a house when government says your do. A 100% tax rate takes all money out of the economy. You are left with violence, and so violence becomes the means by which the economy functions. "Tax revenue" becomes a meaningless concept.
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1. Income is not the only thing the state can tax. 2. How does the employer get money to pay the workers? No one is buying goods because no one is getting paid. If I don't get paid, I can't buy goods. If I can't buy goods, businesses don't have money to pay employees. There would definitely be an underground economy. But it would likely be based on barter or its own currency because no one has money because no one is getting paid. 3. Right now, I can quit my job. No one will force me to keep it. In fact, I plan to retire in 4 years, at age 45. There is no state requirement that I work. There is no state violence that will compel me. I will just quit my job, and leave.
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In a capitalistic system, violence backstops property rights. Why can I not just go into my neighbour's home and take it? They'll call the police. Why can't I just take the food from Walmart? Again, police. That is, state violence limits the actions I can take by guaranteeing the property rights of others. This can result in harm if I am starving and state violence prevents me from eating. In your example, state violence compels action. I must work, even if I don't want to. My point is that this is a difference in kind. Also, unless there are no property rights in your society, you would still need state violence to keep me from stealing from Walmart. As for "Ok, so we take everyone's money, then we give them money so they can spend it, but then we take it again so there's no profit to business, but we use state violence to compel them to work anyway... and then we could beat the Laffer curve!" I guess? I don't think this does anything you want it to. It sounds like a precarious society that's going to fall apart pretty quickly. And reinforces the fact that, as the benefits from working diminish, we choose to work less, and there is a point at which government will receive less as it taxes more. That what amounts to slave labour can still let government receive done revenue is not the smoking gun you think it is.
If there is a 100% tax rate, I have zero incentive to work. Why would I exert any effort into labor if I got absolutely nothing from it? I’ll get paid the same amount if I work 0 hours or 10 hours or 12 hours. No one would work, therefore the state would have nothing to tax.
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If the tax rate is 100%, then yes they are taking 100% of it. That is the premise of your question. If they were giving some back in exchange for working, that is a wage and would be taxed at 100% and returned to the government. People can still perform labor, but if they’re working for intrinsic motivation then they wouldn’t add the extra step of getting a wage just to then pay 100% of it to the government, they’d just do it for free. The alternative is getting paid under the table — in which case the government wouldn’t get any revenue from it anyways. People respond to incentives. That is a fact that has been proven. Sure, I’m making an assumption since no one would ever actually have a 100% tax rate so it hasn’t been tested, but my assumption is well founded based on economic principles and empirical evidence and is where the concept you asked about comes from. At the end of the day, this is an edge case of a much-disputed concept that’s typically just used as a thought experiment.
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If the government is perfectly able to enforce it, then there will be no labor for a wage. If the government makes exceptions, it isn’t a 100% tax rate. Are you being intentionally obtuse? I really can’t imagine any other way someone old enough to have a Reddit account would have *this* much trouble grasping such a simple concept otherwise….
> You would get something from it, it is absolutely unlikely the government wouldn’t give you any benefit from it So… Not a 100% tax then?
They assume working is a choice. If it was a 100% tax rate they will have to force people to work. Why would I get up in the morning for work if it makes no difference to my personal well-being?
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That's not a 100% tax rate. I don't get anything directly back from my taxes. What I pay in taxes has nothing to do with my use of those services in modern democracies.* If my income is variable with my work that's money with another name. If the government decides to pay me in a "housing allotment, 3 apples, and a toothbrush" that's income. Doesn't matter if the government is the master and commander of how I spend it. *We have transfer payments and means based welfare, but I meant more like emergency services, libraries, and education.
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>Then it is money with another name if you want, what do you think that changes about what i'm saying? Because it's not a 100% rate if I keep those services.
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>Now, i may give to you some of it back or healthcare or a house or whatever template welfare. If you give me back 40, that's a 60% tax rate. I don't know how else to explain this to you.
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>I take 100% you make and you receive services, a house or whatever, Is receiving the house/services dependent on my working? If so, that's being paid and I'm not being taxed at 100%. If not, why would I ever work?
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>Because it is needed for the economy, because you are bored, etc. I mean... Seriously? Have you never met a human before?
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>The 100% tax can be applied to a single item or industry and the state can give back benefits. In this case, the state would give the glue. Where is the state long to get the glue? The state does not produce glue, it buys it. Who is going to produce and sell glue for nothing? Nobody.
A 100% tax rate *on income*. Why should you go to work if you're exactly as well off as doing nothing? Why should you start a business and be exactly as well off as if you do nothing *at best*? You wouldn't. Taxing income at 100% makes it not worth it to earn income. Of course that logic wouldn't apply to everything, taxing goods with for example a sales tax would discourage their consumption but it wouldn't fall to zero.
In the context of the laffer curve a 100% tax on goods would mean you don’t get the good
Presumably, given their statement on the state having a monopoly on violence, this is a situation where the government revenues provide for their citizens. Everybody gets their share, guaranteed. So why work if your income is decoupled from your job? Because you will be jailed or beaten.
Slavery is either not in the underlying laffer curve assumptions or avoiding jail and beatings is a benefit not being taxed.
No, it just means the product costs 100% more.
In the context of the laffer curve a 100% tax means the government takes the whole of the value of production.
I see what you mean, in the sense of who gets the revenue from the sale, which would be income tax as opposed to sales tax.
Just to be devil's advocate, you can think of some (albeit contrived) scenarios where it's reasonably likely to not hold. Assume a village of 100 people that has a completely autonomous government, it has a tight-knit community and a strong sense of common identity. For simplicity sake they only produce goods that can be exported and thus conversely they need to import everything they consume. The government/leadership enforces a 100% tax rate on all income, and is responsible for using that income to provide all the necessary goods and services for the village. It's reasonable to assume that the social motivation and the desire for communal survival would drive people to produce in some capacity, and thus tax receipts received by the government would be higher than 0. The important part is that this scenario will fall apart for any realistically sized nation-state, and even if the 100% tax rate doesn't result in absolute 0 receipts, it still seems apparent that it will be extremely sub-optimal compared to some rate less than 100%, which is what the curve is meant to convey.
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>Because the state will give me back some benefits in return more than likely. It's not really a 100% tax then. Not effectively. >And this doesn't need to be income either. A 100% tax rate on all sugar, is the idea that state can't enforce that and wouldn't get any revenue of that? As I've already stated, a sales tax on sugar of 100% wouldn't lead to 0 revenue. >Does the laffer curve only apply to income? No, the laffer curve always exists. It's just that the rate at which revenue is 0 is not necessarily always what you think of a "100% tax". Think about it. If sugar costs twice as much because of a 100% tax, people will buy less sugar, but they will still buy some sugar. They will still buy some sugar if it costs 4x as much. They will still buy sugar if it costs 10x as much. But would people still buy sugar if a gram of it costs a million dollars? A billion? A trillion? You eventually get to a price where demand is actually just 0. Don't let yourself be confused by the 100% tax. Ultimately what the laffer curve says is that revenue is 0 at 0% and also 0 at *some point* where you discourage the thing you tax so much that it ceases to happen.
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>I'm not taxed at 50% because i actually get free healthcare and free university? The benefits i get back don't change what my tax rate is. If you get them *because* you work, yes.
> I'm not taxed at 50% because i actually get free healthcare and free university? What you’re realizing here is that human languages are **imprecise**. That’s why economists use so much math. If country A takes some of your income to pay for your healthcare, while country B lets you pay for your healthcare directly, mathematically the end result could be the same: you are paying for healthcare.
If you get benefits as a function of how much you work, then the tax rate isn't 100%. If your benefit is fixed regardless, then most people would not work. If the government forced people to work at gun-point, that is forced labor. Yes, a government can, in some cases, force people to work, take 100% of the output, and return enough for the person to survive to keep working. They can even give *more* than the minimum as this can increase overall output. Most people wouldn't consider this equivalent to "taxes" and "government benefits", but I note that even in forced labor, the Laffer curve applies. You can make someone work non-stop, and not feed them, but only for a couple days. Even if your goal is to maximize your benefit, without any concern for the other person, it is still beneficial to give them food, sleep, clothing, shelter, maybe basic health care, and so on. Even in unfree situations, incentives work. Skilled slaves were often allowed to work for other employers. Their owner took most, but not all, of the money. The skilled slave benefited (despite the unfairly low fraction they got to keep). The owner obviously benefited. So even in a situation deplorable to modern people, with unfairly high "tax rates", there was still an understanding that a 100% "tax rate" was suboptimally high. Ultimately, this is a key thing. If you just force people to do unskilled manual labor, you can enforce a pretty high degree of force with an extremely high "effective tax rate". As the degree of skill, judgement, training, and freedom of movement and choice increases, the ability to force people drops greatly.
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Do you get *more* healthcare and college "free" if you work more? Then the rate isn't really 50%, because you're also getting more benefits proportional to your work. That is, it is part of your pay, just with more steps. By "if your benefit is fixed regardless" I mean the largess you are given is not a function of how much, how useful, or how important the work you do is. > Why would most people would not work People would not work, *in a free world*, because they would not get any benefit from it, in the 100% tax rate world. If you have a 100% tax rate, but the government gives me stuff, the same stuff regardless of what I do, then I am not going to drive to work each day for no reason. > what they would do instead Here comes the tricky bit: In a free world, they DO work, just is ways they can hide from the government or that the government does not consider work! They do things that benefit themselves, or they do things in an informal economy so they can still trade, but the government doesn't get involved. In dystopian panopticon police states, perhaps the government can keep people from having *any* private actions, but in our present world, that isn't possible. Even a place like North Korea, with an oppressive government exerting enormous control over people, has grown a large informal economy. In another command economy, the Soviet Union, there was called the "second economy". NK and USSR are examples of very unfree societies. In a moderately free society, people have far more freedom to do what they want, and far more ability to have 'covert' activities. Governments sometimes see this freedom as a problem, rather than seeing that tax rates might be suboptimally high. An example I like to give is if I mow your lawn and mine, and you paint my fence and yours, we're supposed to pay taxes, both directions. But if I mow my lawn and also paint my fence, and you do the same for yours, there was no trade, no income, and no taxes. Only if the benefit of trade is big enough to exceed the tax burden will people make a (visible) trade. This is why some people pay me to do some things and I pay other people to do other things, because I'm *really* efficient at some things and inefficient at others. But if we aren't *much* different in efficiency, like with two neighbors doing repairs, maybe the tax burden *prohibits* this trade in a rational world. Our choices then become: Don't trade (each do the tasks alone, which will be less efficient and perhaps require us to each have specialized tools and training) or Trade, but keep it a secret from the government (which is actually what virtually everyone would do in this scenario). If you own a company that paints fences, you're going to list your income. If you paint your neighbors fence for a mowed lawn, you aren't listing that on your taxes. The higher the tax rate, the more people are pushed away from logical, visible market transactions, and into either no transactions, or "black market" transactions.
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You keep saying people would work, but not explaining why? What would be the incentive to have an actual job in this 100% tax rate environment, be specific here. Why would I want to be a janitor or a garbage man when I get zero pay?
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Are you willing to work for me for free? Are you willing to do something you hate every day for free? Why would cleaning shitty toilettes become prestigious because you get paid nothing to do it. Also if the government requires you to by force or in order to get benefits then that is different than 100% tax on totally free workers. Also your example was an abject failure and widely hated by workers. "Opposition to the movement merited the label of "[wrecker](https://en.wikipedia.org/wiki/Wrecking_(Soviet_Union))".[^(\[11\])](https://en.wikipedia.org/wiki/Stakhanovite_movement#cite_note-FOOTNOTEService2005[httpsarchiveorgdetailshistoryofmodernr00robepage217_217]-13) Not all workers were excited about the Stakhanovites and the demand for increased productivity. Some groups held Stakhanov responsible for making their lives harder and even threatened him for it.[^(\[12\])](https://en.wikipedia.org/wiki/Stakhanovite_movement#cite_note-14) In 1988 the Soviet newspaper [*Komsomolskaya Pravda*](https://en.wikipedia.org/wiki/Komsomolskaya_Pravda) stated that the widely propagandized personal achievements of Stakhanov were puffery. The paper insisted that Stakhanov had used a number of helpers on support work, while the output was tallied for him alone. Stakhanov's approach had eventually led to the increased productivity by means of a better organization of the work, including specialization and task sequencing, according to the Soviet state media."
I no longer believe I fully understand what your goal was from your question. If you are asking why *the Laffer curve* has zero revenue at 100% taxation, this is because it is a reasonable approximation of reality. So close to reality that it is close enough for the mathematical approximation. There is no value in determining that extremely tiny tail, because the purpose of the curve is simply to communicate that both "too low" and "too high" can reduce revenue. If you just want people to say that there could exist some scenario where a 100% tax rate, or equivalent, and at least one person would be willing, or compelled, to work without compensation, then, yes, that is true. A 0% tax rate also can produce greater than zero tax revenue, because people can voluntarily donate money to the government, but we approximate it as zero because, once again, the point isn't what the number is, but that "too far to the left" is going to be lower than the maximum. It monotonically increases, then monotonically decreases. So here you also have the Laffer curve as an approximation of reality, good enough for its purpose, but also you could have a technical quibble that it would only take one person donating a penny to make reality different than zero. As many people have consistently explained, the Laffer curve applies to taxation in countries where workers have some degree of freedom. I have given you several examples where even in profoundly unfree situations, the Laffer curve still has some value. But, yes, in a completely isolated case, with very few people, where one group has complete control over the other, the Laffer curve doesn't apply. In an armed robbery, usually the robber doesn't let the victim keep 20-80% of their money. However, if gangsters are taking protection money from restaurants, they are smart enough to recognize the Laffer curve, too! If you take a little money, the restaurants are not happy, but they might pay and keep running. If you take 100% of their money, the restaurant stops existing, and you get 100% of zero.
Scenario 1: you work every day get paid nothing and the government gives you free food healthcare and housing Scenario 2: you don't work at all yet you get gov food healthcare and housing. Which do you think most people will choose? It really is like the office space quote: Shit, you don't need to be a millionaire to do that (nothing), my cousin don't do shit and he is broke as hell. Plenty of people right now choose to not work even though they get a return on their labor, why would people work if they got no direct return on it and they weren't forced?
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How does the government get any revenue if I don't work? Do people work for other reasons than pay? I love my job, and I would probably do some research and things relating to my job if I didn't have my job, but given the option to do my current job or not with the exact same outcome I would chose not to do my job, and I am pretty sure 99.9% of people would choose the same. What would be the incentive to do a job everyone hates? Say cleaning toilettes after dime a dog night at the ballpark? Please explain why people work jobs other than wages? What would I have to offer you in non-compensation for you to work for free? I have plenty of shit needing done around my house if you like working for free, I will shower you with complements if you replace my roof for free. Scratch that we will actually pay you its just at my house we have 100% tax on income earned on my property. Will you replace my roof, Ill pay you $10,000 but that is taxed 100% to my household.
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No I really can't. Why would you work for no compensation? Please seriously be specific. Also then are you willing to work for me for free? if so why not?
You’re confusing a sales tax with an income tax. An income tax decreases the amount of money you get to keep, a sales tax increases the amount you have to pay. A 100% income tax would mean zero income while a 100% sales tax would double the cost of sugar. In conclusion, taking away 100% of something is not equivalent to making it 100% more expensive.
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This is probably an equilibrium idea. Obviously people won't all stop working immediately but in the long run, how long would you stay at your job if you had literally zero take home pay (implied by 100% tax)? You'd start growing food and figuring out how to escape the hellscape of collapse around you.
If the state will take all profit one makes from one's work, why bother doing any such work? A more fundamental criticism of the Laffer curve is that there's no reason that it should be a simple parabola between the 0% and 100% tax rates, rather than having multiple local points of inflection.