Kudlow’s Money Politics

Laffer Curve Tutorial

Here’s the third and final installment in the Laffer Curve video series. It explains why lawmakers need to ditch their dreadful static-scoring model when it comes to the revenue-estimating process, in favor of the more accurate dynamic-scoring model.

Unfortunately, Congress’s revenue-estimating process is still based on the preposterous theory that changes in tax policy don’t affect economic growth. Huh? In other words, the current system assumes the Laffer Curve doesn’t exist. This of course leads to a bias for tax increases and against tax cuts. Hello Hill-Bama …

Reduced marginal tax rates have stood the test of time. They are an effective economic stimulant, creating permanent incentives to work and invest and sufficient fire power to expand the economy’s long-run potential to grow.

History clearly shows that economic behavior responds to changing tax rates. Yes, incentives matter.

For additional information, check out the Center for Freedom and Prosperity.

Larry Kudlow — Larry Kudlow is CNBC’s senior contributor. His new book is JFK and the Reagan Revolution: A Secret History of American Prosperity, written with Brian Domitrovic.

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