Laffer Curve/
Reagonomics/
Trickle-down/
Universal B.I.

After observing that zero taxes give the government zero and 100% taxes make the incentive to work zero, the curve shown was sketched.

Logically, somewhere between those extremes, the government would maximize its revenue. Reagan trade-marked this thinking and because taxes at the time were excessive, "trickle-down" worked when he reduced them.

In a two-party system, political combatants shout "more Reagan; more benefits" or "trickle-down has been proven wrong". Nobody acts as a referee pondering the curve at the top of the page.
These are study notes for an Economics 101 refresher. Embedded are "client side" slider programs:
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Try changing tax rates below to explore what "perturbation theory" reveals about the shape of the Laffer Curve near measured 2024 conditions in Canada:
See Mercantilism and Reaganomics
Econometrics Modelling - Basic
also Measuring and Stats Can specifically curr/cap accts




Corporate Taxation:
Currently ~20% of revenue is tax on corporations, which are mobile. When companies leave, the whole GDP is reduced by the percent change in taxation times the "%/% ratio" below.
Corporate Tax Companies show moderate %/% ratio. They do business elsewhere when taxes are high.Rate [now ~25%/yr]
Tax to Supply Warning: elasticities are normally X (supply) to Y (price). This is reversed.*** %/% ratio
Change in Supply: nuval% of$2.241billion [$ttlb 2024].
One of the criticisms of the Laffer Curve above is that it assumes only one tax rate. Canadian data shows that the low 50% of taxpayers earn ~30% of GDP, the middle 30% earn ~30% and the top 20% earn ~40%. Their Federal + Provincial tax rates are around 25%, 26% and 28%. Assume the Canadian 2024 Numbers to get income tax revenue when you adjust these rates:
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12.34
12.34
Total revenue: $1234 [$599.9Billion 2024].
Assume Taken from the 22% of GDP that is non-mortgage investment. See estimate under "Savings=Investment" below.supply is influenced 22% by savings/capital, which is unevenly distributed; 0% saved by the bottom third, 20% by the middle third and 80% by the top third:
Investment Investors show high ratio, meaning they find off-shore alternatives when taxes are high.%/% ratio
Tax revenue reactions [0.1234] [1.234] [2.34]; total $ttlbillion.

Assume Taken from the 55% of GDP that is consumer expense.demand is influenced 55% by labor; impacted by the resulting reduction in take-home pay due to taxes:
Labor If over 10%, people hate taxes and "work under the table". Low ratio means tolerating taxes.%/% ratio
Tax revenue reactions [0.1234] [1.234] [2.34]; total $ttlbillion.


Rough Notes

GDP equals the economy's total income,
$2.241Trillion is distributed
over31.814million returns
and22.5 million households:

GDP is also the sum C + I + G + NX
  • Consumer spending,C = 55%; households buy Examples include clothing/furniture, food, and health care.goods, and services.
  • Investment, I = 21%; Examples include machinery, unsold products, and housing.capital equipment, inventories, and structures.
  • Government Spending,G = 23%; all levels buying Examples include naval ships and salaries to government employees. goods and services.
  • Net exports, NX: production exported minus goods/services imported.
  • Revenue for the Canadian federal government, 2022-2023: Personal Income Tax: 46.4%, Corporate Income Tax: 21.0%, Non-Resident Income Tax: 2.9%, Other: (GST, energy taxes, etc.) 29.5%,
    Muliplier for income taxes = 2.1552
  • In 2024, total revenues administered by CRA for provincial and territorial governments and First Nations were $180,586 million,
  • Ontario 11.5% corporate tax rate.
  • Approximately one-third of households rent their homes; around 5 million households.
  • Total household net worth Canada was $17.49 trillion 2024, averaging $1.025 million over 17.1 million households. The top 20% average $3.3 million each and the bottom 40% average $84,600.
  • OAS program expenditures are about 2.68% of Canadian GDP in 2023. The total paid out by the CPP was $56.0 billion; 2.50% of GDP.
  • The Alberta Heritage Fund market value: $30 billion 2025.
  • TSX & TSXV had 1,798 listed issuers 2023; market cap $4.23 trillion.
    • Variables above have an "elasticity" slider. which selects the percent response of the effect variable for a percent change in the cause variable. This is called a purturbation method, and the starting point is simplified data from Canada, 2024.

    In an economy, every variable interacts with every other variable in multiple feedback loops, each of which generates an infinite series solution. This model substitutes a single pass through a few variables, approximating what governments can change in a year's time.

    Underlying Algorithm:
    a In actual fact every variable interacts with every other variable with an infinite series solution. Complex System.
    This demo does a single pass through the above variables, starting with the effect of changing corporate rax rate.Approximated.

    GDP, the Canadian economy's total income, was $ Trillion in 2024 and gets stored in GDPvalOrig.
     


    Shifting Capital to The GST
    to Implement
    Universal Basic Income.

    The proposal - expand the holdings of the Canada Pension Plan so dividend/interest income will reduce the current extreme income disparity.

    This should shift capital away from already-wealthy taxpayers, but still promise them "     Trickle Up" from increased consumption.

    The CPP fund already pays out disability pensions, and GST pays low-income households $589 plus $231 per minor. GST only transfers funds between consumers (demand-side) whereas the CPP plan holds capital that works supply-side while paying dividends and interest and keeping ahead of inflation.

    The holdings of the plan are large and well-managed (unlike many others) and could be used to both provide capital for the overall economy and increase GST payouts without taxing consupmption.

    (This counteracts the trope that "anything the government gets its hands on gets spent and is taken out of the economy's overall source of capital"). Another selling-point is that consumption would be boosted, benefiting corporate profits. (That would be "trickle up" instead of down.)

    Trickle Up is located on the LHS of the Laffer Curve, and in Reagan's time the US economy was on the RHS. Thus Trickle Down worked. Soon labor will be displaced by AI et.al. and consumption will drop; shifting everybody to the LHS.

    One major challenge is to persuade Fiscal Conservatives that times have changed and implenting even more Reaganomics is not justified.