Laffer-able
I suppose I should start this by saying that it’s hard not to like Art Laffer. He’s affable and sincere.
His extreme supply-side ideas are kind of quaint and even entertaining. Last night he was on Fast Money, but his comments weren’t so funny anymore.
The segment was on the proposed Obama tax cuts. Laffer didn’t think much of them. Instead, he wondered aloud, what if the government proposed a 6-month income tax moratorium: how great a stimulus would that be? After all, Laffer reasoned, freeing citizens from the undue burden of taxes would get them all out working harder and spending money.
Really? Did anyone on the panel believe that Americans of all income levels are sitting on the couch–or lounging out by the pool–instead of working because they’re unhappy with their income tax? They’re knocking off early because the marginal rates are too high and they’d prefer the leisure time to the minimal extra money? Fascinating. Unemployment moving toward double digits and the greatest white-collar restructuring in 15 years all because of onerous income taxes?
Sure, he’s a guest on the show–they’re being polite, right?–but not one of the traders said a word about this preposterous idea. They just nodded their heads in agreement and kept the bobbing up as Laffer launched into his idea that capital gains should not be taxed at all.
The slam against the Obama cuts was that the money would go into the mattress, not stimulate the economy. After all, that’s what happened with the Bush stimulus checks. Fair enough. But why would the wealthy be any different? Cut their income tax or capital gains and they’ll put the money in the mattress right now too.
Not that cutting the capital gains tax would do anything to move money off the sidelines. Where would it go? What productive use would it be put to?
I’d share the segment with you but there’s no clip of his appearance on the CNBC site and the short post on the segment on Fast Money’s page is covered by an instrusive pop up. Maybe they’ve finally gotten a sense of shame for promoting this voodoo.
January 6th, 2009 at 3:08 pm
Well, our tax rate is 56%, and yes, one of the reasons I don’t work more is because when I do we just get hit even harder by the AMT. It seems kind of pointless for me to try to add to our income.
But I don’t find Laffer amusing at all.
(I should say that’s 56% in TOTAL taxes, state, fed, payroll, etc.)
January 6th, 2009 at 3:42 pm
The first things that always comes to mind when I hear his last name are the appropriateness of it’s pronunciation and Marvin Gardner’s satire of his curve which appeared in Scientific American in the distant past. Found a copy on the web here:
http://dovbear.blogspot.com/2007/09/neo-laffer-curve.html
January 6th, 2009 at 4:11 pm
“Not that cutting the capital gains tax would do anything to move money off the sidelines. Where would it go? What productive use would it be put to?”
Real simple. As others have pointed out, individuals in the US are overindebted, and will not spend or borrow more until they have paid down their current debts. They may save some of their stimulus (i.e. tax cuts), but they will spend some too.
January 6th, 2009 at 4:21 pm
For a large chunk of the population, cutting taxes is always a good policy response. Many stay mum either because they’re in that group or depend on others in that group for their livelihood. Certainly, corporate media does not want hosts or guests that, for instance, recommend higher taxes on the rich or corporations and lower for the poor.
And, I believe that “any justification”, even if invalid, is acceptable to that group if there’s a chance any viewer accepts that argument. As in political campaigns, they’ll “try anything and hope something sticks”.
January 6th, 2009 at 6:06 pm
My taxes are crippling (I’m a young professional in midtown NYC), and I know that if my taxes were cut I would: 1) be able to spend some more money; 2) be buying more equities.
Unfortunately, Obama’s tax policies don’t consider people working in high cost of living areas, and instead he wants to give all the breaks to middle america (literally and figuratively).
January 6th, 2009 at 6:22 pm
«6-month income tax moratorium: how great a stimulus would that be? After all, Laffer reasoned, freeing citizens from the undue burden of taxes would get them all out working harder and spending money. [ ... ] They just nodded their heads in agreement and kept the bobbing up as Laffer launched into his idea that capital gains should not be taxed at all.»
That kind of well paid sycophant somehow is always and only against capital gains and income taxes that immorally oppress highly productive high income winners, and curiously enough never mentions the well deserved burden of sales taxes and payroll taxes on the low income worthless losers in the lowest 80% of the population.
January 6th, 2009 at 7:10 pm
I was watching it when he came on and after I heard his criticism of the Obama plan and his tax moratorium plan, I turned it off. I think both Laffer and Larry Kudlow, have marginalized themselves as economists with their rigid adherence to ’supply side’ economics. They are both broken records. I wonder why CNBC keeps Kudlow and puts Laffer on so often.
January 6th, 2009 at 9:32 pm
Donna says she pays 56% in taxes. Thus if you make 100,000 you pay 56,000. Or if you make 1,000,000 you pay 560,000.
I don’t think so. You’re talking about marginal rates.
January 6th, 2009 at 10:25 pm
“Did anyone on the panel believe that Americans of all income levels are sitting on the couch–or lounging out by the pool–instead of working because they’re unh”appy with their income tax? ”
Speaking as a sample of one. tax rates hardly affect my behavior at all. I just save/invest less or borrow more. I pay taxes quarterly and for some reason I save and invest less in some months than in others.
January 6th, 2009 at 10:35 pm
I would rather see a temporary (e.g., 12 months) suspension of the payroll tax, than to spend an equivalent amount of money on bridges to nowhere, or parks for polar bears. It MIGHT be true, IN THE SHORT RUN, that paying people to dig holes and fill them up again would “stimulate” the economy more than letting people keep their own money. But to the extent that individuals choose to save their additional after-tax income, rather than spending it, that’s a good thing in and of itself. There’s nothing wrong with individuals paying down their debt, or increasing their savings. I think that would constitute a far better use of money than much of the construction spending that Obama wants. I know that I would much rather keep my own money than to give it to Obama’s buddies.
And we must also realize, of course, that the bill for all this spending nonsense is going to come due one of these days.
January 6th, 2009 at 10:44 pm
No need for bridges to nowhere. Please sign up for the Pickens Plan. TODAY. pickensplan.org
The more people who sign up, the more he can persuade politicians to make our nation more self-sufficient.
PLEASE.
January 6th, 2009 at 10:50 pm
“Did anyone on the panel believe that Americans of all income levels are sitting on the couch … instead of working because they’re unhappy with their income tax? They’re knocking off early because the marginal rates are too high and they’d prefer the leisure time to the minimal extra money?”
I think that for people who work for an employer and who earn a steady paycheck, the marginal tax rate has very minimal impact on their choice of work versus leisure. But for people who own their own business, or for professionals who have a choice between working more or less, the marginal tax rate does make a difference (although probably a lot less so in a slack economy). I’m in the first category rather than the second, but for me, the marginal tax rate would make a difference if I owned a business. The issue is also more complicated than just work versus leisure; there is also the matter of expending time and effort to fully utilize legal tax loopholes, and to utilize other “loopholes” that are not so legal. The higher the tax rates go, the more tax avoidance one can expect, at least for small business owners.
I think Laffer is afraid of the future tax liability that Obama is imposing on all of us, and I share his concern.
January 6th, 2009 at 10:58 pm
“I think Laffer is afraid of the future tax liability that Obama is imposing on all of us, and I share his concern.”
I’d be more impressed with his and your concern for the future liability if it had been expressed any time in the last 8 years.
January 7th, 2009 at 12:33 am
Marion Maneker @ 10:58
Don’t assume that I like “Bush deficits” any more than “Obama deficits”.
And Laffer has been very critical of Bush, at least over the last few months.
January 7th, 2009 at 10:23 am
@Marion Maneker,
I voted for Perot. Are you impressed? I thought not. Haha.