More from Richard Thaler on the estate tax – and the Laffer curve

I have thought about whether the 45 percent tax rate might be so high that it is on the downward sloping part of the Laffer Curve, that is, past the point where revenues are maximized.

Arthur Laffer’s idea, that lowering taxes could increase revenues, was logically correct.  If tax rates are high enough, then people will go to such lengths to avoid them that cutting taxes can increase revenues. What he was wrong about was in thinking that income tax rates were already so high in the 1970s that cutting them would raise revenues.  George H. W. Bush famously called this Voodoo Economics.

Is it possible that lowering the estate tax rate to, say, 35 percent, could increase revenues?

Full comment at Economix.

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  • Dave

    it seems that they are trying to close loop holes – and if they do that – how can people avoid paying taxes.