Submitted by Just Thinking Economics
Who ever said that increased taxation will help Barbados out of its current mess needs to have their heads examine. We are already overly taxed and to inflict further pain…..”broadening the tax base”…. will do nothing more than to compound “the already poor” problems.
Just imagine asking small incomers (working under the $25,000 threshold) to contribute by way of income taxes. Madness I dare say. It is inconceivable to ask a restaurant worker or a paltry shop assistant, barely scraping a meager wage, to fork out good monies to be further squandered by this Government….the likes of Four Seasons. $400 million good taxpayers dollars gone the way of Jacob’s horse nostril.
Even now Mr. Minister, Barbados is reeling under the effects of Laffer Curve theory. We have had increase taxation, as with the Value Added Tax increase (by 2.5%) , but the nett effect was collecting even less tax.
According to the learned professor, increasing taxation will have a negative effect, slowing down an already ailing community, retarding the money multiplier, killing off what little growth, that there might be, in short being counter-productive… Sounds familiar? More taxes will do little to alleviate our problem. Consider more production, we need to produce solar panels and the like…. we need to provide employment for our school leavers…. we need to increase our foreign exchange.
From Wikipedia, the free encyclopedia
In economics, the Laffer curve is a representation of the relationship between possible rates of taxation and the resulting levels of government revenue. It illustrates the concept of taxable income elasticity—i.e., taxable income will change in response to changes in the rate of taxation. It postulates that no tax revenue will be raised at the extreme tax rates of 0% and 100% and that there must be at least one rate where tax revenue would be a non-zero maximum.
The Laffer curve is typically represented as a graph which starts at 0% tax with zero revenue, rises to a maximum rate of revenue at an intermediate rate of taxation, and then falls again to zero revenue at a 100% tax rate. The actual existence and shape of the curve is uncertain and disputed.[1]
One potential result of the Laffer curve is that increasing tax rates beyond a certain point will be counter-productive for raising further tax revenue. A hypothetical Laffer curve for any given economy can only be estimated and such estimates are controversial. The New Palgrave Dictionary of Economics reports that estimates of revenue-maximizing tax rates have varied widely, with a mid-range of around 70%.[2]
Although economist Arthur Laffer does not claim to have invented the Laffer curve concept,[3] it was popularized in the west with policymakers following an afternoon meeting with Ford Administration officials Dick Cheney and Donald Rumsfeld in 1974 in which he reportedly sketched the curve on a napkin to illustrate his argument.[4] The term “Laffer curve” was coined by Jude Wanniski, who was also present at the meeting. The basic concept was not new; Laffer himself notes antecedents in the writings of the 14th century Arabic muslim social philosopher Ibn Khaldun .[5]
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