Glenn Beck's laughable attempt to illustrate the Laffer curve

Blog ››› ››› JEREMY HOLDEN

In order to attack progressive income tax rates, Glenn Beck tried his darndest to educate his followers about the Laffer curve, arguing that higher tax rates necessarily lead to reduced revenues:

BECK: It's called the Laffer curve. The higher the income tax, the less you pay.

He even attempted to illustrate what the Laffer curve would look like graphically:

laffer

The curve Beck drew would illustrate a relationship where, as tax rates increased, revenue would also increase approaching an undefined level represented by the Y axis. But since that graphic would completely undermine Beck's words, I'll assume he inverted the variables on either the X or the Y axis in order to show an inverse relationship between tax rates and revenue. But the logical outcome of that relationship would be that maximum revenue is obtained when income is taxed at a rate of zero percent.

The Laffer curve takes its name from economist Arthur Laffer, who reportedly illustrated the relationship between tax rates and revenue on a napkin:

Time's Justin Fox reported:

It's a saga that began in a bar near the White House on a December afternoon in 1974. Huddled at a meeting arranged by Wall Street Journal editorial writer Jude Wanniski were [Dick] Cheney, then the deputy chief of staff to Republican President Gerald Ford, and Laffer, who was teaching at the University of Chicago's business school after a stint in the Nixon White House. In trying to explain to Cheney why a tax hike mooted by the President might not be such a great idea, Laffer drew a chart on a napkin that showed government revenues increasing as the tax rate moved up from 0% but then turning around and heading back toward zero as it neared 100%.

So Laffer's original curve showed revenues increasing along with tax rates up to a certain point of maximum revenue, not -- as Beck indicated -- a more unidirectional relationship. A traditional representation of the Laffer curve is not the curve Beck drew, but rather a parabola:

laffer2

It should be noted that economists have criticized references to the Laffer curve as a justification for reducing income tax rates in the United States. In Peddling Prosperity: Economic Sense and Nonsense in an Age of Diminished Expectations, Paul Krugman wrote, "Nobody questions that something like the Laffer curve exists; but even the supply-siders are skeptical about whether the U.S. economy is really in the 'backward-sloping' section."

At this point, I guess we have surpassed the information-maximizing point on the Glenn Beck show.

Posted In
Economy
Network/Outlet
Fox News Channel
Person
Glenn Beck
Show/Publication
Glenn Beck show
We've changed our commenting system to Disqus.
Instructions for signing up and claiming your comment history are located here.
Updated rules for commenting are here.