Issues & Insights

The Laffer Curve Strikes Again

Arthur Laffer, the man behind the curve. Photo: Gage Skidmore, licensed under the Creative Commons Attribution-Share Alike 2.0 Generic license (https://creativecommons.org/licenses/by-sa/2.0/deed.en).

Excerpt provided by the Committee to Unleash Prosperity. Sign up to receive a free subscription to the full weekday Unleash Prosperity Hotline newsletter by clicking here: https://committeetounleashprosperity.com/hotline/

We noted last week that Treasury Secretary Janet Yellen’s complaint that the trend toward lower global tax rates has the story completely upside down. This isn’t a “race to the bottom,” it is a race for lower taxes globally (and freedom from oppressive government), and it is a race that, thanks to Trump’s tax cuts, America is WINNING. Yellen wants an international tax cartel to pump up marginal rates to end global tax competition – truly one of the worst ideas of all time.  

Now a new study comes along from Chris Edwards of the Cato Institute which finds that even though international tax RATES have fallen, it is a myth that corporate tax payments are lower.

Edwards finds that the average OECD corporate tax rate in the 1980s of 46.2% raised 2.4% of GDP.  The average tax rate in the 2010s of 26.7% raised 2.9% of GDP. Lower rates, more revenue! It’s called the Laffer Curve.

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