税务英语文章阅读.docx

1、税务英语文章阅读税务英语文章阅读Laffer curveIn economics, the Laffer curve (also KhaldunLaffer 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 elasticityi.e.,taxable income will change in r

2、esponse 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

3、 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. One potential result of the Laffer curve is that increasing tax rates beyond a certai

4、n 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

5、 mid-range of around70%.Although economist Arthur Laffer does not claim to have invented the Laffer curve concept, it was popularized with policymakers following an afternoon meeting with Ford Administration officials Dick Cheney and Donald Rumsfeld in 1974 in which he reportedly sketched the curve

6、on a napkin to illustrate his argument. 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 Ibn Khaldun and John Maynard Keynes.Laffer curve: t* represents the rate of taxation at w

7、hich maximal revenue is generated. This is the curve as drawn by Arthur Laffer, however, the curve need not be single peaked nor symmetrical at 50%.Laffer explains the model in terms of two interacting effects of taxation: an arithmetic effect and an economic effect. The arithmetic effect assumes th

8、at tax revenue raised is the tax rate multiplied by ther evenue available for taxation (or tax base). At a 0% tax rate, the model assumes that no tax revenue is raised. The economic effect assumes that the tax rate will have an impact on the tax base itself. At the extreme of a 100% tax rate, the go

9、vernment theoretically collects zero revenue because taxpayers change their behavior in response to the tax rate: either they have no incentive to work or they find a way to avoid paying taxes. Thus, the economic effect of a 100% tax rate is to decrease the tax base to zero. If this is the case, the

10、n somewhere between 0% and 100% lies a tax rate that will maximize revenue. Graphical representations of the curve sometimes appear to put the rate at around 50%, but the optimal rate could theoretically be any percentage greater than 0% and less than 100%. Similarly, the curve is often presented as

11、 a parabolic shape, but there is no reason that this is necessarily the case.Jude Wanniski noted that all economic activity would be unlikely to cease at 100% taxation, but would switch from the exchange of money to barter. He also noted that there can be special circumstances where economic activit

12、y can continue for a period at a near 100%taxation rate (for example, in war time). Various efforts have been made to quantify the relationship between tax revenue and tax rates (for example, in the United States by the Congressional Budget Office). While the interaction between tax rates and tax re

13、venue is generally accepted, the precise nature of this interaction is debated. In practice, the shape of a hypothetical Laffer curve for a given economy can only be estimated. The relationship between tax rate and tax revenue is likely to vary from one economy to another and depends on the elastici

14、ty of supply for labor and various other factors. Even in the same economy, the characteristics of the curve could vary over time. Complexities such as progressive taxation and possible differences in the incentive to work for different income groups complicate the task of estimation. The structure

15、of the curve may also be changed by policy decisions. For example, if tax loopholes and off-shore tax shelters are made more readily available by legislation, the point at which revenue begins to decrease with increased taxation is likely to become lower.Laffer presented the curve as a pedagogical d

16、evice to show that, in some circumstances, a reduction in tax rates will actually increase government revenue and not need to be offset by decreased government spending or increased borrowing. For a reduction in tax rates to increase revenue, the current tax rate would need to be higher than the rev

17、enue maximizing rate. In 2007, Laffer said that the curve should not be the sole basis for raising or lowering taxes. ProblemsLaffer assumes that the government would collect no income tax at a 100% tax rate because there would be no incentive to earn income. Research has developed theoretical mathe

18、matical models in which a Laffer curve can slope continuously upwards all the way to100%, though it is not clear whether or when the assumptions on which such mathematical models are based hold in real economies. Additionally, the Laffer curve depends on the assumption that tax revenue is used to pr

19、ovide a public good that is separable in utility and separate from labor supply, which may not be true in practice. The Laffer curve as presented is also simplistic in that it assumes a single tax rate and a single labor supply. Actual systems of public finance are more complex. There is serious dou

20、bt about the relevance of considering a single marginal tax rate. In addition, revenue may well be a multi valued function of tax rate - for instance, an increase in tax rate to a certain percentage may not result in the same revenue as a decrease in tax rate to the same percentage (a kind of hyster

21、esis).Empirical dataTax rate at which revenue is maximizedA possible non-symmetric Laffer Curve with a maximum revenue point at around a 70% tax rate, based on How Far Are We From The Slippery Slope? The Laffer Curve Revisited by Mathias Trabandt and Harald Uhlig. The New Palgrave Dictionary of Econ

22、omics reports that a comparison of academic studies yields a range of revenue maximizing rates that centers around 70%.Economist Paul Pecorino presented a model in 1995 that predicted the peak of the Laffer curve occurred at tax rates around 65%.A 1996 study by Y. Hsing of the United States economy

23、between 1959 and 1991placed the revenue-maximizing average federal tax rate between 32.67% and35.21%.A 1981 paper published in the Journal of Political Economy presented a model integrating empirical data that indicated that the point of maximum tax revenue in Sweden in the 1970s would have been 70%

24、. A paper by Trabandt and Uhlig of the NBER from 2009presented a model that predicted that the US and most European economies were on the left of the Laffer curve (in other words, that raising taxes would raise further revenue). Congressional Budget Office analysis In 2005, the Congressional Budget

25、Office (CBO) released a papercalled Analyzing the Economic and Budgetary Effects of a 10 Percent Cutin Income Tax Rates. This paper considered the impact of a stylizedreduction of 10% in the then existing marginal rate of federal income tax in the US (for example, ifthose facing a 25% marginal feder

26、al income tax rate had it lowered to 22.5%).Unlike earlier research, the CBO paper estimates the budgetary impact of possible macroeconomic effects of tax policies, that is, it attempts to account for how reductions in individual income tax rates might affect the overall future growth of the economy

27、, and therefore influence future government tax revenues; and ultimately, impact deficits or surpluses. In the papers most generous estimated growth scenario, only 28% of the projected lost revenue from the lower tax rate would be recouped over a 10-year period after a 10%across-the-board reduction

28、in all individual income tax rates. In other words, deficits would increase by nearly the same amount as the tax cut in the first five years, with limited feedback revenue thereafter. Through increased budget deficits, the tax cuts primarily benefiting the wealthy will be paid for plus interest by t

29、axes borne relatively evenly by all taxpayers. The paper points out that these projected shortfalls in revenue would have to be made up by federal borrowing: the paper estimates that the federal government would pay an extra $200 billion in interest over the decade covered by the papers analysis.Oth

30、erLaffer has presented the examples of Russia and the Baltic states, which instituted a flat tax with rates lower than 35% and whose economies started growing soon after implementation. He has similarly referred to the economic outcome of the Kemp-Roth tax act, the Kennedy tax cuts, the 1920s tax cu

31、ts, and the changes in US capital gains tax structure in 1997.Some have also cited Hausers Law, which postulates that US federal revenues, as a percentage of GDP, have remained stable at approximately 19.5% over the period 1950 to 2007despite changes in marginal tax rates over the same period. Other

32、s however, have called Hausers Law misleading and contend that tax changes have had large effects on tax revenues.Optimal taxationOne of the uses of the Laffer curve is in determining the rate of taxation which will raise the maximum revenue (in other words, optimizing revenue collection). However,

33、the revenue maximizing rate should not be confused with the optimal tax rate, which economists use to describe a tax which raises a given amount of revenue with the least distortions to the economy. Relationship with supply-side economicsSupply-side economics is a school of macroeconomic thought that argues