11.28.2018

Roughly simplified

Some people has difficulties to understand that a country's income is not infinite. They usually seem to be of the opinion that the State can raise the taxes, especially the income tax and only for the ones with high incomes. These people are often totally unaware of the Laffer curve.

I sometimes make a roughly comparison between an individual person and a State:
If a private person falls short of money they often takes a payday loan or similar. The costs increases and the chance to balance their economy shrinks.

It's the same with a State. When the State runs out of money it often increases the taxes. When the State have reached the point of Laffer curve the income reduces but the cost remains, and the chance to balance the economy reduces.

It is the same outcome, with the only difference that the later one has much bigger numbers.

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