Dan Mitchell on the Laffer Curve and Health Care

Deconstructing the Laffer Curve(s)  

February 12, 2022 by Dan Mitchell

 The Laffer Curve is a method for illustrating the relationship between tax rates, taxable income, and tax revenue.

 

But it’s important to realize that there are actually lots of varieties. The Laffer Curve for capital gains taxes, for instance, will look different than the Laffer Curve for payroll taxes. Or corporate taxes. Or marijuana taxes. In every case, the shape of the curve will depend on what’s being taxed and the ability of affected taxpayers to alter their behavior. And the shape of the Laffer Curve also will depend on whether one is measuring the short-run revenue impact of tax changes or the long-run impact of tax changes.  Given all these varieties, no wonder so many people, both right and left, sometimes misstate its meaning.

Let’s try to expand our understanding of the Lafffer Curve by looking at some new research.........To Read More....

The Economics of Food vs. the Economics of Healthcare

February 23, 2022 by Dan Mitchell

The health care system in the United States is expensive and inefficient, and both of those problems are caused by government.

\More specifically, politicians have enacted laws (everything from the tax code’s exclusion of fringe benefits to programs such as Medicare and Medicaid) that have produced a system overwhelmingly based on third-party payer. And with so many people using (what they perceive to be) other people’s money to buy healthcare, we shouldn’t be surprised to see perverse results. In a genuine free market, buyers and sellers directly interact. Both sides of the transaction have an incentive to get the best-possible outcome, and this process promotes efficiency and low prices.

 

In America’s healthcare system, however, government policies have saddled us with intermediaries that weaken, distort, or even eliminate normal market forces. Which explains high costs and inefficiency, which is how we began this column.

To understand why third-party payer plays such a pernicious role, let’s look at a column that Dr. Ryan Neuhofel wrote for the Foundation for Economic Education. He imagines a world where we buy food at the grocery store the same way we currently buy healthcare.........To Read More.....