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Taxation
In 1804, the English government raised the duties on sugar 20 per cent. It might have been expected, that their average product to the public exchequer would have been advanced in the same ratio; i. e. from 2,778,000l. the former amount, to 3,330,000l.: instead of which the increased duties produced but 2,537,000l.; exhibiting an absolute deficit. Speech of Henry Brougham, Esq., M. P., March 13, 1817.
This is from Jean-Baptiste Say, A Treatise on Political Economy, translated from the 4th edition, Book III, Chapter VIII.
READER COMMENTS
Kurt Schuler
Nov 15 2020 at 5:11pm
As you are no doubt aware, the Laffer Curve is a lot older than 200 years. Ibn Khaldun had a statement of it. Bruce Bartlett wrote a series of three short articles on the subject back in 2012. Here is a page with links to all of them.
David Henderson
Nov 15 2020 at 10:25pm
Good point, Kurt. Thanks.
Thomas Hutcheson
Nov 16 2020 at 8:00am
Was this a short run elasticity or a long run elasticity? How should the optimal tariff have been calculated or even the revenue maximizing triff?
Julian the (non-economically) Apostate discovered that lower rates coupled with better enforcement produced more tax revenue in Italy.
Mark Brady
Nov 17 2020 at 12:51am
And here are Dupuit (1844) and Keynes (1933) on the topic.
“If a tax is gradually increased from zero up to the point where it becomes
prohibitive, its yield is at first nil, then increases by small stages until it
reaches a maximum, after which it gradually declines until it becomes zero
again.” -Arsène Jules Émile Juvénal Dupuit, “On the Measurement of the Utility of Public Works” (1844; English translation, 1952).
“Nor should the argument seem strange that taxation may be so high as to defeat its object, and that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance than an increase of balancing the budget. For to take the opposite view today is to resemble a manufacturer who, running at a loss, decides to raise his price, and when his declining sales increase the loss, wrapping himself in the rectitude of plain arithmetic, decides that prudence requires him to raise the price still more—and who, when at last his account is balanced with nought on both sides, is still found righteously declaring that it would have been the act of a gambler to reduce the price when you were already making a loss.” -John Maynard Keynes, The Means to Prosperity (London: Macmillan & Co., 1933).
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