Arthur Laffer is predicting 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 based 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 really should be doing because these aristocrats are collecting more of their loot and spending more of their money before taxes rise. He says that when taxes go up, Americans who can will choose to make a lot less money, thus reducing the government's tax revenue.
Source for this article: Arthur Laffer predicts collapse when Bush tax cuts expire in 2010 By Personal Money Store
Expired Bush tax cuts 2010
Arthur Laffer became extremely famous when he influenced the Reagan administration to cut taxes. His Laffer Curve concerning taxes appears in some of the economic textbooks. Laffer, in his Wall Street Journal column, said that all of the Reagan tax cuts brought the economy out of what was the worst U.S. recession given that the Depression — until the Mt. Everest recession we’re still trying to get out of now made that one look like just 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 all of the 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 spending 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 another 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 quite a bit of self-sustained growth despite the tax increases. Bangalore also points out that if the Laffer Curve theory about tax cuts is actually 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 also questioned by The Motely Fool. 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. The Fool says it is worth noting that 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 much more than just 50 percent. The Obama tax plan wants to revert the highest personal income tax rates to 39.6 percent, where they were within the ’90s when the economy boomed and also the government collected more taxes than it spent.
Arther Laffer feels your pain
Arther Laffer, the chairman of an investment consulting firm and therefore is extremely 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, lackluster job growth, and housing market challenges are factors that may have far greater influence on the economy. Most plan to keep their head up to survive. But when Arthur Laffer’s personal income tax rate goes up by around 5 percent, the millions he won’t pocket will seem like the end of the world indeed.
Additional details at these websites
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
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