The Consumption Tax and Supply-Side Economics: Some Short-Term Revenue Effects

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Cato Journal, 1981, vol. 1, issue 2, 629-632

Abstract: In this paper we present a logical extension of the Laffer model that casts doubt on the above criticisms of supply-side economics. In particular, we show that (1) because of “dual taxations,†Reagan’s tax rate cuts will unambiguously lead to immediate (short-term) increases in government revenue; (2) the prohibitive zone is larger than Laffer originally hypothesized, thus increasing the probability that the United States is currently in the prohibitive zone; (3) the greater the tendency for people not to save because of the tax rate cuts, the greater the immediate increases in tax revenue...

Keywords: supply-side economics; consumption tax; taxation; government (search for similar items in EconPapers)
Date: 1981
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Persistent link: https://EconPapers.repec.org/RePEc:cto:journl:v:1:y:1981:i:2:p:629-632

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