Dec

12

Laffer Curve? from Kim Zussman

December 12, 2009 |

Here is a quick look at 2008 per-capita GDP and income taxes.

Country data on "all-in" income tax rate (income tax plus employee social security contributions):

Calculated average % tax for single (no child, two children), married single earner (no child, two children), and compared to per-capita GDP from Wikipedia/IMF, by country for major countries:

Country                  Tax          GDP pc

Australia            21.7%   36918
Austria              32.8%   39887
Belgium            36.6%   36416
Canada            19.2%   39098
Czech Republ    15.1%   25118
Denmark          38.2%   37304
Finland             30.0%   36320
France              24.0%   34205
Germany          33.0%   35539
Greece             26.4%   30681
Hungary           38.3%   19553
Iceland             19.5%   40471
Ireland              10.0%   42110
Italy                  25.6%   30631
Japan               18.3%   34116
Korea               11.2%   27692
Luxembourg      21.5%   82441
Mexico               5.1%   14534
Netherlands        32.6%   40558
New Zealand       21.2%   27083
Norway              27.9%   53738
Poland               24.6%   17537
Portugal              18.7%   22232
Slovak Republic   16.8%   22097
Spain                  14.5%   30589
Sweden               26.7%   37334
Switzerland          18.3%   43196
Turkey                 26.8%   13139
United  Kingdom   24.8%   36358
United States       17.7%   40440

Ignoring that the Laffer Curve is supposed to be an inverted parabola, here is regression showing no relationship:

Regression Analysis: GDP versus all in tax

The regression equation is
GDP = 30035 + 18111 all in tax

Predictor    Coef  SE Coef     T      P
Constant    30035     7250  4.14  0.000
all in tax     18111    29442  0.62  0.543

S = 13134.8   R-Sq = 1.3%   R-Sq(adj) = 0.0%

An exercise left to the reader would be effect of within-country change in all-in personal tax vs per-capita GDP.


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