TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, February 2, 2012

Laffer: Gingrich's Tax Plan Beats Romney's

Wall Street Journal op-ed, Why Gingrich's Tax Plan Beats Romney's, by Arthur B. Laffer:

Mr. Gingrich has a significantly better [tax] plan than does Mr. Romney, and he has twice before been instrumental in implementing a successful tax plan on a national level—once when he served in Congress as a Reagan supporter in the 1980s and again when he was President Clinton's partner as speaker of the House of Representatives in the 1990s. During both of these periods the economy prospered incredibly—in good part because of Mr. Gingrich.

Jobs and wealth are created by those who are taxed, not by those who do the taxing. Government, by its very nature, doesn't create resources but redistributes resources. To minimize the damages taxes cause the economy, the best way for government to raise revenue is a broad-based, low-rate flat tax that provides people and businesses with the fewest incentives to avoid or otherwise not report taxable income, and the least number of places where they can escape taxation. On these counts it doesn't get any better than Mr. Gingrich's optional 15% flat tax for individuals and his 12.5% flat tax for business. Each of these taxes has been tried and tested and found to be enormously successful. ...

The current administration's notion of fairness—taxing high-income earners at high rates and not taxing other income earners at all—is totally unfair. It is also anathema to prosperity and ultimately leads to the situation we have in our nation today.

In 2012, those least capable of navigating complex government-created economic environments find themselves in their worst economic circumstances in generations. And the reason minority, lesser-educated and younger members of our society are struggling so greatly is not because we have too few redistributionist, class-warfare policies but because we have too many. Overtaxing people who work and overpaying people not to work has its consequences. ... Economic growth achieved through a flat tax in conjunction with a pro-growth safety net is the only way to raise incomes of those on the bottom rungs of our economic ladder.

Mr. Gingrich's tax proposal is not revenue-neutral, nor should it be. If there's one truism in fiscal policy, it's this: Wasteful spending will always rise to the level of revenues. Whether you're in Greece, Washington, D.C., or California, overspending is a prosperity killer of the first order. Mr. Gingrich's flat tax proposals—along with his proposed balanced budget amendment—would put a quick stop to overspending and return America to fiscal soundness. No other candidate comes close to doing this.

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I am not sure what is more predictable: Mr Laffer supporting a bad idea or the WSJ supporting the person who is supporting a bad idea. The fact that Mr Laffer is taken at all seriously, at least by some, is testimony to the faultiness of historical memory. He has been peddling his particular brand of tax snakeoil for over three decades even after it has been showen to be no more valid then Cold Fusion. Raising the taxes on the poor, working and middle classes to be able to afford a tax break for millionaires all on the discredited premise that that particular brand of income redistribution will result in a balanced budget, economic growth, jobs or anthing else except richer rich and poorer poor is nonsense. And to call it "fair" is to futher debase that word. And now he is selling the idiot notion that it was our tax policy and government spending that created the financial crisis. Ignoring the truth that it was cheap money, government NON regulation and good old fashioned free market greed that lead to the government having to step in and bail out the drunken sailors who steer the economy onto the rocks of collapse. Government spending saved the economy Mr Laffer, it was people following your advice who almost ruined it. No sale.

Posted by: George W | Feb 2, 2012 3:07:12 PM

Wow! What a typical liberal attack by "George W" --
· make unfounded personal attacks against an author,
· use inflamatory adjectives rather than objective terms,
· state a false conclusion without even trying to offer support,
· misstate the objective of an alternative tax proposal,
· switch the argument to something unrelated and blame companies for a financial crisis rather than the politicians (e.g., Barney Frank -- NOT Bush) who demanded and forced wide-open lending,
· attack free markets while saying that we need even more government regulations (how's that Sarbanes-Oxley working for you?),
· and say that we need more deficit government stimulus spending that has been proven almost worthless and designed to provide political plums for money-handlers.

Sorry, George W., "no sale" to you. Been there, done that. I don't blame you for not using your real name with analysis like that. I just hope that you're not a professor pushing your failed philosopy on students.

Posted by: Woody | Feb 3, 2012 7:11:49 AM

Federal Reserve Bank charts are racist.

Another Look at Obamanomics vs. Reaganomics

... Let’s start with the GDP data. The comparison is striking. Under Reagan’s policies, the economy skyrocketed. Heck, the chart prepared by the Minneapolis Fed doesn’t even go high enough to show how well the economy performed during the 1980s.

Under Obama’s policies, by contrast, we’ve just barely gotten back to where we were when the recession began. Unlike past recessions, we haven’t enjoyed a strong bounce. And this means we haven’t recovered the output that was lost during the downturn. ....

Unfortunately, the jobs chart is probably even more discouraging. As you can see, employment is still far below where it started.

This is in stark contrast to the jobs boom during the Reagan years. ....

But I want to make a different point. As I’ve written before, Obama is not responsible for the current downturn. Yes, he was a Senator and he was part of the bipartisan consensus for easy money, Fannie/Freddie subsidies, bailout-fueled moral hazard, and a playing field tilted in favor of debt, but his share of the blame wouldn’t even merit an asterisk.

My problem with Obama is that he hasn’t fixed any of the problems. Instead, he has kept in place all of the bad policies – and in some cases made them worse. Indeed, I challenge anyone to identify a meaningful difference between the economic policy of Obama and the economic policy of Bush. ....

I always tell people not to pay attention to party labels. Bigger government doesn’t work, regardless of whether a politician is a Republican or Democrat. The problem isn’t Obamanomics, it’s Bushobamanomics. But since that’s a bit awkward, let’s just call it statism.

Posted by: Woody | Feb 3, 2012 1:10:15 PM