“Unfortunately, the Laffer curve did not work as advertised. Lower tax rates did not produce more tax revenues. They produced deficits.”

— Robert Kuttner

Source: The Economic Illusion (1984), Chapter 5, Taxes, p. 208
Context: The total impact of the Reagan tax cuts on capital lowered the effective cost of capital to American industry by an estimated 1.2 percent. Unfortunately, the Laffer curve did not work as advertised. Lower tax rates did not produce more tax revenues. They produced deficits.

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Robert Kuttner 23

American journalist 1943

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“Taken to its logical extreme, the Laffer curve makes no sense because, if you lower your taxes to zero, how are you going to get higher revenues?”

Jean Chrétien (1934) 20th Prime Minister of Canada

Source: My Years As Prime Minister (2007), Chapter Two, The Virtuous Circle, p. 75
Context: I never bought into the Laffer curve, a theory, named after an American supply-side economist who had been an adviser to the Reagan administration, that essentially argues that a government will increase its revenue by reducing its taxes. If it were that easy, everybody would do it. What politician doesn't want to reduce taxes in order to win votes? Taken to its logical extreme, the Laffer curve makes no sense because, if you lower your taxes to zero, how are you going to get higher revenues? In practice, every government that toyed with this theory ended up with larger deficits, higher interest rates and greater social inequality.

“Our true choice is not between tax reduction, on the one hand, and the avoidance of large Federal deficits on the other. It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenue to balance our budget just as it will never produce enough jobs or enough profits. Surely the lesson of the last decade is that budget deficits are not caused by wild-eyed spenders but by slow economic growth and periodic recessions, and any new recession would break all deficit records. In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now. The experience of a number of European countries and Japan have borne this out. This country's own experience with tax reduction in 1954 has borne this out. And the reason is that only full employment can balance the budget, and tax reduction can pave the way to that employment. The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.”

John F. Kennedy (1917–1963) 35th president of the United States of America

Source: 1962, Address and Question and Answer Period at the Economic Club of New York

“In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.”

John F. Kennedy (1917–1963) 35th president of the United States of America

1962, Address and Question and Answer Period at the Economic Club of New York (549)

“A tax cut means higher family income and higher business profits and a balanced federal budget…. As the national income grows, the federal government will ultimately end up with more revenues. Prosperity is the real way to balance our budget. By lowering tax rates, by increasing jobs and income, we can expand tax revenues and finally bring our budget into balance.”

John F. Kennedy (1917–1963) 35th president of the United States of America

Source: "Radio and Television Address to the Nation on the Test Ban Treaty and the Tax Reduction Bill" (18 September 1963) http://www.presidency.ucsb.edu/ws/?pid=9413

“When the federal government spends more each year than it collects in tax revenues, it has three choices: It can raise taxes, print money, or borrow money. While these actions may benefit politicians, all three options are bad for average Americans. Deficits mean future tax increases, pure and simple. Deficit spending should be viewed as a tax on future generations, and politicians who create deficits should be exposed as tax hikers.”

Ron Paul (1935) American politician and physician

Deficits Make You Poorer http://www.lewrockwell.com/paul/paul238.html (March 15, 2005).
2000s, 2001-2005

“I repeat: our practical choice is not between a tax-cut deficit and a budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy; or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues, and achieve--and I believe this can be done--a budget surplus. The first type of deficit is a sign of waste and weakness; the second reflects an investment in the future.”

John F. Kennedy (1917–1963) 35th president of the United States of America

Source: 1962, Address and Question and Answer Period at the Economic Club of New York

“Total Revenues amounting to P2.337 trillion will finance the proposed 2015 national budget, representing a Revenue Effort of 16.5% and a growth rate of 15.8%. Tax Revenues, Mr. President, in particular, is targeted at P2.194 trillion, representing a Tax Effort of 15.5%.”

Francis Escudero (1969) Filipino politician

2014, Speech: Sponsorship Speech for the FY 2015 National Budget

“[A] revenue-neutral carbon tax would benefit all Americans by eliminating the need for costly energy subsidies while promoting a level playing field for energy producers.”

George Shultz (1920) American economist, statesman, and businessman

Why We Support a Revenue-Neutral Carbon Tax: Coupled with the elimination of costly energy subsidies, it would encourage competition. http://www.wsj.com/articles/SB10001424127887323611604578396401965799658 "Commentary" article in the Wall Street Journal, co-authored with the Nobel-Prize-winning economist Gary Becker, dated April 7, 2013.

“[A] revenue-neutral carbon tax would benefit all Americans by eliminating the need for costly energy subsidies while promoting a level playing field for energy producers.”

Gary S. Becker (1930–2014) American economist

“One of the hackneyed liberal complaints goes something like this: 'Bush is the first president in history to cut taxes during a war.' Nonsense. Bush didn’t cut taxes; he cut tax rates across the board - on income, dividends and capital gains. And that’s precisely why tax revenues have soared. When a department store wants to make more money, it doesn’t raise its prices, it cuts them and announces a big sale. If you want more work and investment, you hold a sale on economic activity by cutting tax rates, thereby reducing the cost of productive activity and increasing the prospect of after-tax returns on work and investment.”

Mike Rosen (1944) American political pundit

July 22, 2005 Rocky Mountain News column

“Unfortunately, the Laffer curve did not work as advertised. Lower tax rates did not produce more tax revenues. They produced deficits.”

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Robert Kuttner 23

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