To get the best understanding of this economic point, please fully understand the Laffer Curve 

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If the government needs $10 in tax revenue and has an economy of $100 the simple and best way forward is to collect 10% tax.  With the full comprehension of the Laffer Curve, we know that higher tax rates reduce economic activity.   To get that $10 we need to tax at around 12% because the GDP of the economy has dropped about 12% to roughly $88.  
If we exempt or allow the deduction the first 50% of peoples earnings we now have an economy of $50 and taxing wants not needs.  We must now move to the faster loss taxable GDP Laffer Curve chart and we see that the most we could collect after a 51% loss of economic activity (thus people’s earnings) is $7.50.  

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Please note, $50 was the full taxable GDP after exemptions and credits, thus we need to cut all the dollars in this chart in half.
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Watch the whole thing to get a better understanding of the Laffer Curve, although the lesson on deductions is at 7:25 
 


Comments

08/25/2015 7:21am

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    Bill Haley

      Bill Haley started Haley2024 in the spring of 2013 in an effort to his part in restoring freedom to America.

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