The Laffer curve. Can cuts in tax rates increase the total tax revenue for the government?

Dossier / Travail , 2014 , 38 Pages

Gestion d'entreprise - Comptabilité, Fiscalité

Apparently mapped out on a napkin during a dinner with the journalist Jude Wanniski in 1974, the Laffer curve - called after Arthur B. Laffer who is widely seen as “The father of supply-side economics” - has become one of the most controversially discussed topics in terms of tax politics since published by the before mentioned journalist in 1978.

As taxes are the most important income source for all governments, politicians around the globe are trying to determine the highest realizable tax revenue. Therefore they are using whatever they can to justify their decisions and the Laffer curve was and is used since the 80’s to promote tax cuts as a way to increase tax revenue. The objective of this work is to analyse a tool that is consistently used to establish decisions that sound great in the ears of potential voters but that is – at least at first glance – not very convincing in its approach as there are obvious conceptual limitations. Ultimately the question Laffer curve is suited to increase the total tax revenue by cutting tax rates.

Table of Contents

Preface

Table of Contents

List of Abbreviations

List of Figures

List of Tables

List of equations

1. Introduction
1.1 Objectives
1.2 Structure

2. The Laffer-curve
2.1 The theory behind the graph
2.2 Elasticity
2.3 Taxes and elasticity
2.4 Inconsistencies within the Laffer curve

3. Case study: Reagan Tax Cuts in the early 1980s
3.1 Background on Reagan Tax program
3.2 Methodology
3.3 Results of income groups analysis
3.4 Conclusion of the case study

4. Case study: Tobacco tax program in Germany
4.1 Background on the tobacco tax program in Germany
4.2 Methodology
4.3 Demand and elasticity of cigarettes
4.4 Elasticity and tax revenues of cigarettes
4.5 Conclusion of the case study

5. Conclusion

Appendices
Appendix A: “Important tobacco tax data”

Bibliography

Further reading

Declaration

• Université: University of applied sciences, Nürnberg
• Auteurs: Martin Pruschkowski (Auteur), Alexander Grimm (Auteur), Wolfram Stiasny (Auteur)
• Année de publication: 2014
• Pages: 38
• N° de catalogue: V432952
• ISBN (ebook): 9783668751644
• ISBN (Livre): 9783668751651
• Langue: anglais
• mots-clé: Laffer curve, tax cuts, tobacco tax programm, Zigarettensteuer, theory