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 should because these aristocrats are collecting a lot more of their loot and spending a lot more of their money before taxes rise. He says that when taxes go up, Americans who can will choose to make less money, thus reducing the government’s tax revenue anyway.
Resource for this article: Arthur Laffer predicts collapse when Bush tax cuts expire in 2010
Bush tax cuts expire 2010
Arthur Laffer became famous when he helped to influence the Reagan administration to cut taxes. His Laffer Curve regarding taxes appears in numerous 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 given that 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 all of these tax cuts went into effect on Jan. 1, 1983 the economy took off like a rocket, with average real growth reaching 7.5 percent in 1983 and 5.5 percent in 1984. He doesn't seem to explain at all how Bush tax cuts in 2001 and 2003 in the face of two wars eventually ran the U.S. economy into the ground and destroyed a spending budget surplus he inherited from Bill Clinton.
Arthur Laffer’s 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 following 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 valid, the U.S. economy would have done much better than the weakest period of economic expansion in history following the Bush tax cuts of 2001 and 2003.
Obama has a tax plan lower than Reagan’s
Also, Arther Laffer's predictions of economic collapse when tax cuts expire in 2010 is apparently 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. According to The Fool, 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 a lot more than 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 much more taxes than it had spent.
Arther Laffer says he feels your pain
Arther Laffer, 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 all of the obstacles the economy will face in 2011 have little to do with tax increases. 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 5 percent, the millions he won't pocket might seem to him like the end of the world indeed.
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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