Arthur Laffer is predicting that the U.S. economy will collapse next year when George W. Bush tax cuts expire in 2010. His theory on the Obama tax plan is depending on how the super-rich can choose when and just how they collect their income to evade having to pay their taxes. Laffer believes the economy is doing better this year than it should because these aristocrats are collecting more of their loot and spending a lot more of their money before taxes rise. He also says that when taxes have to go up, Americans who can will choose to make less money, thus reducing the government’s tax revenue anyway.
2010 Bush tax cuts expire
Arthur Laffer became very famous when he influenced the Reagan administration to cut taxes. His Laffer Curve regarding taxes appears in some of the economic textbooks. Laffer, in his Wall Street Journal column, said that Reagan tax cuts brought the economy out of what was the worst U.S. recession since the Depression — until the Mt. Everest recession we’re still trying to get out of now made that one look like a speed bump. He said when tax cuts went into effect on Jan. 1, 1983 the economy took off like a rocket, with average real growth that was reaching 7.5 percent in 1983 and also 5.5 percent in 1984. He doesn’t mention how Bush tax cuts in 2001 and 2003 in the face of two wars eventually ran the U.S. economy to the ground and destroyed a budget surplus he inherited from Bill Clinton.
The Arthur Laffer curveball
The Laffer Curve tax cut argument misleads his readers, as reported by Asha Bangalore at Northern Trust. As one more recession set in after Laffer’s utopic Reaganonomic era, Bangalore wonders why the economy posted substantial growth after tax increases were implemented by Bill Clinton in 1993. A revival of bank lending after the Reagan hangover led to self-sustained growth despite all of the tax increases. Bangalore also points out that if the Laffer Curve theory about tax cuts is really valid, then the U.S. economy would have done better than record the weakest period of economic expansion in history following the Bush tax cuts of 2001 and 2003.
Lower than Reagan’s tax plan is Obama’s
Arther Laffer’s predictions of economic collapse when tax cuts expire in 2010 is questioned by The Motely Fool also. In his column Laffer says we’re all going to die when the highest federal personal income tax rate goes to 39.6 percent from 35 percent. As outlined by The Fool, it is worth noting the 1983 cuts Laffer remembers so fondly lowered top rates from 69.13 percent to 50 percent. Top marginal tax rates under all but one year of Ronald Regan’s presidency were more than 50 percent. The Obama tax plan wants to revert the highest personal income tax rates to be someplace around 39.6 percent, where they were within the ’90s when the economy boomed and the government collected more taxes than it spent.
Your pain felt by Arther Laffer
Arther Laffer, who actually is the chairman of an investment consulting firm and clearly very wealthy, is making predictions of economic collapse from a very narrow point of view. Bangalore goes further to point out that the obstacles the economy will face in 2011 have nothing to do with tax increases. A severe credit crunch and housing market challenges are factors that can have far greater influence on the economy. Most individuals will keep their head up and make an effort to survive. But when Arthur Laffer’s personal income tax rate goes up 5 percent, the millions he won’t pocket might seem to him like the end of the world indeed.
Read a lot more on this topic here
Wall Street Journal
online.wsj.com/article/SB10001424052748704113504575264513748386610.html?mod=WSJ_latestheadlines
Northern Trust
northerntrust.com/pws/jsp/display2.jsp?XML=pages/nt/0601/1138283678319_6.xml&TYPE=interior&er=dgcDetail&c=primary/resource/1006/1275944180574_442.xml
Motley Fool
caps.fool.com/Blogs/ViewPost.aspx?bpid=403124&t=01003534026331805883
