Arthur Laffer Warns There Will Be Tax Hikes
Arthur Laffer Warns There Will Be Tax Hikes – Everyone knows that tax rates are going up, at least for rich people, once the Bush tax cuts expire at the end of this year. So Mr. Laffer has weighed in with a provocative article in the Wall Street Journal, headlined: “Tax hikes and the 2011 economic collapse.”
“It has always amazed me how tax cuts don’t work until they take effect,” he wrote in his June 6 op-ed. “Mr. Obama’s experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011.”
Laffer has long experience in this area. His theories in the 1970s helped build the Republican political argument for the Reagan tax cuts in the 1980s. The economy took off after that.
The problem with his argument is that he only tells the short-term story. Laffer relates how Americans and corporations will shift as much income as possible from 2011 to 2010. Thus, tax revenues will be lower next year than they would be otherwise.
That’s all true. But America’s economy is not going to crash because government revenues go up or down in a single year. The real policy question is what the long-term effect of the tax hikes will be.
Tags: 1970s, 1980s, Arthur Laffer, Bush Tax Cuts, Corporations, Deferred Tax, Economic Collapse, economy, Government Revenues, obama, Policy Question, Political Argument, Provocative Article, Reagan Tax Cuts, Tax Rate Increases, Tax Rates, Tax Revenues, Wall Street, Wall Street Journal
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