The Laffer Curve: Thoma v. Luskin

The recent good news on tax revenues has led to renewed discussions of Laffer’s cocktail napkin. For good rebuttals, see Mark Thoma and Paul Krugman. Of course, Donald Luskin has attempted a rebuttal of Krugman.

Luskin cannot deny that tax revenues have fallen so he provides a graph of projected nominal Federal tax revenues where revenues in 2009 was projected to be 10% higher than they were in 2000. You might be wondering what his graph would have looked liked had it been constructed in terms of real Federal revenues per capita. Our graph shows the 1991 to 2004 historical record. And if one deflates the 2009 estimate by prices and express it in per capita terms, projected real Federal revenues per capita for 2009 would still be below the 2000 level. Mr. Luskin knows this but he’s hoping his readers are too stupid to understand the simple point.