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Laffer Curve

For us (as in the US), the Laffer curve is deride for the observation that if you reduce the tax rate you increase tax revenues. x(0) will always be zero, but for any given tax rate, it appears that reducing it can result in increased revenues at a later date. The feedback time on such changes is > 6 months, so it is not a variable you want to tweak too heavily or too often. After the feedbacks have neutralized though the function changes and the peak revenue will be behind you again. Dial back just a little and a little more money is taken out of the hands of government initially put back in the hands of production, production increases, tax revenues increase and the curves adjusts itself again.

This equation would be challenging at best to "model" though. Trying to factor in the insane tracks that fads take is like predicting volcanic eruptions. Get close to the event and you can see what is likely about to happen. A little further away (time wise) and you are rolling the dice.

I suspect it would be easier to create such a model than creating a model to predict the climate though.

Re: Laffer Curve

The great skill of Gordon Brown was that he was able to raise taxes till the blood rand dry without actually causing there to be a revolution. The nearest approach was a brief grumble about fuel tax rises.
But it is apparent that tax raising is about trying to find the optimum tax revenue by increasing taxes to the point where revenue is maximised.
Occasional it goes wrong and a classic example might be the tax on cigarettes and tobacco.
With the necessary "its for your own good" health reasons to justify increasing tax so very high Gordon Brown hit a snag when tax revenues fell off because the tax level was too high. The problem wasn't that people were stopping smoking, always a danger that some people might take seriously the justification and actually stop smoking, and of course many have, but that people were fining their holidays abroad were subsidised by bulk buying their cigarettes and bringing them home. Cross Channel trips with a stop in Belgium for the cheaper cigarettes was a popular move and for the more adventurous, Turkish cigarettes were really cheap. (Russian cigarettes were cheaper still).
The individual exploiter of cheaper fags over seas were of course one target for the chancellor but his real problem was that it was less risky to smuggle cigarettes than drugs, the penalties far less and the profits just as good.
Gordon's response was not to bring the taxes down but to appoint a further 1000 customs officers in an attempt to clamp down on smuggling and legal (under EU rules) purchases of bulk quantities for own use. There being, of course, a difference of opinion between HM Customs and the punter as to what a realistic quantity is for one's own use.

Re: Laffer Curve

We don't have to cross the channel here, we just find a reservation. Every time taxes are raised by the feds or states, the tribes get bigger smiles.

Re: Laffer Curve

Maximising tax revenues should never be an end in itself but that tax revenues tend to rise when rates are reduced is illustrative of the maxim that what is good for the individual is good for society too.

Brown's customs clampdown is illustrative of Britain's fractious relationship with the EU as a whole. I can almost understand British euroskepticism because you gold plate all of the regulation, enforce it with unnecessary zeal, and then get opt-outs from the things that would benefit ordinary citizens.

It is always depressing when I drive to see my parents in the UK - crossing 3 national borders without slowing down and then inevitably getting the third degree from some lippy 19 year-old with 3 GCSEs at the tunnel. The last one leant into my face, with my British Passport in her hand and shouted very slowly "do you speak English?" at me (to which the response "Yes, and fluent German, and Italian, and some French and Dutch. What about you?" didn't earn me any brownie points).

This is supposed to be a completely border-free, free trade zone yet when Brits go anywhere there are passport checks because of the belief that the UK is a special target for illegal migrants, you have to change your increasingly worthless money into something that is acceptable across most of the rest of Europe, and because Brown trashed the pound (n.b. without any meaningful impact on balance of trade) those cigarettes aren't really cheaper anyway.

Re: Laffer Curve

JamesV: "...because of the belief that the UK is a special target for illegal migrants..."

And is this belief mistaken?

Re: Laffer Curve

I am not sure if it is mistaken or not. However, I have not seen encampments of illegal migrants anywhere in the UK (and I'm aware the Daily Mail would tell me it's because they are all put up in 9-bed mews in Kensington at taxpayer's expense) but have seen extensive makeshift camps of illegals in Milan and Paris. These camps (unlike the ones around Calais) are full of people not trying to get to the UK but happy where they are. If the UK had an open border, then the encampments in Calais would move to the UK, but they must represent a tiny proportion of the illegal immigrants in Europe, most of whom would not attempt to move to the UK. So all the UK's closed border policy achieves is to make these people somebody else's problem. Not that there aren't plenty of things France, Germany and others do to make other problems somebody else's.

If it is not mistaken then I'd suggest you stop making the UK such an attractive destination for illegal migrants relative to other EU countries.

That would surely be a much better response than wasting resources on delaying legitimate travellers from other neighbouring rich countries by an average of 30 minutes at Heathrow - resources that could be redeployed to places where Europe genuinely does have vulnerable borders.