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 Laffer and Moore: A 50-State Tax Lesson for the President

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lmm
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PostSubject: Laffer and Moore: A 50-State Tax Lesson for the President   Sat Apr 21, 2012 9:08 am

We have to have a little politics now and then, otherwise we're just a bunch of people saying good morning to each other........... Giggle


Laffer and Moore: A 50-State Tax Lesson for the President

By ARTHUR LAFFER AND STEPHEN MOORE

Barack Obama is asking Americans to gamble that the U.S. economy can be taxed into prosperity. That's the message of his campaign for the Buffett Rule, which raises income-tax rates on millionaires to a minimum of 30%, and for the expiration of the Bush tax cuts. He wants to raise the highest income tax rate by 20%, double the rate on capital gains, add a new 3.8% tax on all capital earnings, and nearly triple the dividend tax rate.

All this will enhance "economic efficiency," insists a White House economic report. As for those who disagree, says President Obama, they're just pushing "the same version of trickle-down economics tried for much of the last century. . . . But prosperity sure didn't trickle down."

Mr. Obama needs a refresher course on the 1920s, 1960s, 1980s and even the 1990s, when government spending and taxes fell and employment and incomes grew rapidly.

But if the president wants to see fresher evidence of how taxes matter, he can look to what's happening in the 50 states. In our new report "Rich States, Poor States," prepared for the American Legislative Exchange Council, we compare the economic performance of states with no income tax to that of states with high rates. It's like comparing Hong Kong with Greece or King Kong with fleas.

Every year for the past 40, the states without income taxes had faster output growth (measured on a decadal basis) than the states with the highest income taxes. In 1980, for example, there were 10 zero-income-tax states. Over the decade leading up to 1980, those states grew 32.3 percentage points faster than the 10 states with the highest tax rates. Job growth was also much higher in the zero-tax states. The states with the nine highest income tax rates had no net job growth at all, and seven of those nine managed to lose jobs.

Then there's the question of in-migration from state to state—or how people vote with their feet. As common sense would dictate, people try to move from anti-growth states and cities to more welcoming climates. There are relevant factors other than tax policy, of course (as in North Dakota today, where the oil boom has brought about the lowest unemployment rate in the nation), but in general the most popular destination states don't have income taxes. That's as true recently as it was 40 years ago.

Over the past decade, states without an income tax have seen 58% higher population growth than the national average, and more than double the growth of states with the highest income tax rates. Such interstate migration left Texas with four new congressional seats this year and spanked New York and Ohio with a loss of two seats each.

The transfer of economic power and political influence from high-tax states toward low-tax, right-to-work ones is one of America's most momentous demographic changes in decades. Liberal utopias are losing the race for capital. The rich, the middle-class, the ambitious and others are leaving workers' paradises such as Hartford, Buffalo and Providence for Jacksonville, San Antonio and Knoxville.

Illinois, Oregon and California are state practitioners of Obamanomics. All have passed soak-the-rich laws like the Buffett Rule (plus economically harmful regulations, like California's cap-and-trade scheme), and all face big deficits because their economies continue to sink. Illinois has lost one resident every 10 minutes since hiking tax rates in January. California has 10.9% unemployment, having lost 4.8% of its jobs over the past decade.

Now these blue states may raise tax rates again. In California, a union-backed ballot initiative would raise the state's highest tax rate to 13.3%. Union-funded groups in Illinois aren't satisfied with last year's income tax rate hike to 5% from 3%, so they now want to go as high as 11%. That would put them in the big leagues with California and New York. And in Oregon, lawmakers are considering raising the highest rate to 13% from 9.9%. In all of these states, proponents parrot Mr. Obama, insisting that the rich can afford it.

They can, but they can also afford to save hundreds of thousands or more each year by getting out of Dodge. Every time California, Illinois or New York raises taxes on millionaires, Florida, Texas and Tennessee see an influx of rich people who buy homes, start businesses and shop in the local economy.

Republican governors in Florida, Georgia, Idaho, North Dakota, South Carolina, Ohio, Tennessee, Wisconsin and even Michigan and New Jersey are cutting taxes to lure new businesses and jobs.

Asked why he wants to reduce the cost of doing business in Wisconsin, Gov. Scott Walker replies: "I've never seen a store get more customers by raising its prices, but I've seen customers knock down the doors when they cut prices."

Georgia, Kansas, Missouri and Oklahoma are now racing to become America's 10th state without an income tax. All of them want what Texas has (almost half of all net new jobs in America over the last decade, for one thing).

Taxes aren't all that matters, to be sure, and low-tax states don't always outperform high-tax ones. Often people who smoke don't get cancer, and sometimes people who don't smoke do get cancer, but that doesn't mean it's smart to smoke. It's a dangerous gamble to raise taxes on capital and businesses to nearly the highest rates in the world and hope that nothing bad will happen.

Mr. Laffer is president of Laffer Associates. Mr. Moore is a member of the Journal's editorial board.
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PostSubject: Re: Laffer and Moore: A 50-State Tax Lesson for the President   Sun Apr 22, 2012 10:00 pm

So we have Arthur Laffer preparing a report "Rich States, Poor States," prepared for the American Legislative Exchange Council comparing the economic performance of states with no income tax to that of states with high rates. I will presume he is advocating in favor of the states with no income tax.

Quote :
If you’ve fallen behind on your Laffer reading, Rich States, Poor States is mostly a collection of Laffer’s other reports from throughout the year, copy-pasted into one convenient location.

The centerpiece of this “new” report is the “ALEC-Laffer State Economic Competitiveness Index,” which is essentially a 15-item wish list of policies that Laffer and ALEC would like to see enacted in every state. Over half the items in the Index are related to low or regressive taxes, while the others are mostly related to labor issues.

As we’ve pointed out before, the most laughable thing about the Index is the way it claims to provide a look at the important “policy variables” under the control of state lawmakers, but then ignores the ones that actually matter. For instance, few people would argue that good schools or basic infrastructure (power, transit, roads) are unimportant to states’ economic performance. But the ALEC-Laffer rankings give states no credit for either of these outcomes. On the contrary, adequately funding any public service actually reduces states’ rankings since Laffer assumes that tax revenue is detrimental to economic growth.

http://ctj.org/taxjusticedigest/archive/2012/04/arthur_laffers_rich_states_poo.php

According to Laffer and the Koch brothers’ beneficiary ALEC, it’s OK if we don’t have road or bridges or schools. What’s important is that taxes be kept as low as possible; zero would apparently be ideal.

More about ALEC:


ALEC: The vast right-wing conspiracy
http://ohiodailyblog.com/content/alec-vast-right-wing-conspiracy

What's the source of these anti-union measures? Meet ALEC, a right-wing group that writes state laws for Republicans
http://www.americablog.com/2011/03/whats-source-of-these-anti-union.html

Now back to Laffer: He prefers states with low or no income tax. Then where does the state get its revenue?

Quote :
Not Always Cheaper to Live There
The fact that a state does not have an income tax does not necessarily mean that its residents pay less in taxes than residents of states with an income tax. All states must generate revenue and they do so through various taxes including income taxes, sales taxes, property taxes, license taxes, fuel taxes, and estate and inheritance taxes, just to name a few. In states without state income tax, higher sales, property and other assorted taxes can exceed the annual cost of a state income tax.
http://usgovinfo.about.com/od/incometaxandtheirs/a/nostatetax.htm

And what does David Stockman, budget director for President Reagan who put so much stock in Laffer’s supply-side economics, have to say about Laffer’s ideas?

Quote :
During the Reagan era, this balance of political force disappeared. Aside from charlatans such as Arthur Laffer, Republicans didn’t desert straightaway to the “deficits don’t matter” camp. Instead, they embraced a more insidious proposition: that deficits disappear on their own if doused with enough economic growth from tax cuts and deregulation.

Never mind that there was never any budgetary math to support this fiction.

http://www.politico.com/news/stories/0210/33412.html

So now that everybody is agreed that Arthur Laffer makes erroneous judgments on data for some of it, and for the rest just makes stuff up, why should we put any stock in what he has to say?

Add to that the fact that he is in bed with one of the biggest but perhaps least-known motivating forces of the Vast Right Wing Conspiracy who looks out after the interests of only those who would benefit most from the lowest taxes, and you have someone who from the beginning has been about advocating the policies that only those who feel no responsibility (tax-wise) for the maintenance and advancement of society could warm to.


"It’s OK if we don’t have road or bridges or schools. What’s important is that taxes be kept low. You know, starve the beast and all that Grover Norquist garbage."
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PostSubject: Re: Laffer and Moore: A 50-State Tax Lesson for the President   Mon Apr 23, 2012 12:10 am

Hello prop,
Long time no see.

You want to belittle Laffer's work (actually Laffer and Stephen Moore) by using the CTJ which is just a left wing site that follows the left line of the rich don't pay taxes and corporations are evil? By claiming "So now that everybody is agreed that Arthur Laffer makes erroneous judgments" doesn't mean that any one agrees to that. Laffer knows his stuff. He said "Taxes aren't all that matters, to be sure, and low-tax states don't always outperform high-tax ones. It's a dangerous gamble to raise taxes on capital and businesses to nearly the highest rates in the world and hope that nothing bad will happen." So he not saying it always work but it usually does.



About The Citizens for Tax Justice
Our Mission

Citizens for Tax Justice, founded in 1979, is a 501 (c)(4) public interest research and advocacy organization focusing on federal, state and local tax policies and their impact upon our nation. CTJ's mission is to give ordinary people a greater voice in the development of tax laws. Against the armies of special interest lobbyists for corporations and the wealthy, CTJ fights for:

Fair taxes for middle and low-income families
Requiring the wealthy to pay their fair share
Closing corporate tax loopholes
Adequately funding important government services
Reducing the federal debt
Taxation that minimizes distortion of economic markets


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The Propagandist
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PostSubject: Re: Laffer and Moore: A 50-State Tax Lesson for the President   Mon Apr 23, 2012 2:37 pm

Howdy, old friend. I have expanded my range of forums to visit so I don't make it back around as often as I did. It is interesting to see the wide range of viewpoints available at different sites. One time while reading, one opinion struck my "shock and disbelief" laugh button, and I spit my mouthful of beer all over the keyboard. That ended my chatting 'til I could replace it.

Meanwhile, about Arthur Laffer and his now-debunked "curve," which now resides out there amongst Bigfoot and UFOs ...

Watch this video
Getting the Laffer Curve Right
http://www.pbs.org/newshour/businessdesk/2012/04/getting-the-laffer-curve-right.html

Arthur Laffer explains his “curve.” He uses assumptions as “facts” to make his point. However …

… David Cay Johnson, an investigative journalist and author and a specialist in economics and tax issues, also appearing in the video, says that nobody in his or her right mind would pass up the chance to make more money simply because tax rates have been raised from what they were previously. Even a tax rate of 50% is unlikely to discourage a person from making an extra $100,000 if it was evident that, after taxes, they would be $50,000 richer. He also discloses that he is in the top 1% of income earners.

Peter Diamond of MIT echoes this sentiment. He sees no reason not to raise rates when government needs the revenue for infrastructure, education, research and development. He contends that the present top marginal tax rate is well below the rate which would discourage extra earning.

Both of them said that it would be foolish to stray into the extremely high “prohibitive zone” which would actually reduce incentive to earn and thereby reduce government revenue.

Laffer himself agrees that funding needs to be given to those items mentioned above. Then he backtracks and says that there is no reason to give government extra revenue, because where that money will go that is received in extra taxes is not certain.

I would say that that is true of every dollar that is received in taxes. We certainly can’t have NO taxes just to allay Laffer’s apprehensions of the use to which that tax money would be put.

This is the Laffer Curve:




This is the modified curve talked about in the video:


Note: A non-symmetric Laffer Curve with a maximum revenue point at around a 70% tax rate. This graph is based on the results from "How Far Are We From The Slippery Slope? The Laffer Curve Revisited" by Mathias Trabandt and Harald Uhlig, NBER Working Paper No. 15343, September 2009. Specifically, it mimics the curve found in Figure 2 of that paper. Their research estimated Laffer Curve maximum revenue points to be between 60% to 80% tax rates.

Both charts: http://en.wikipedia.org/wiki/Laffer_curve

See:
Given to occasional overstatement, Laffer is as much salesman as scholar. The former University of Chicago professor and part-time economic adviser to Reagan told People magazine in 1979 that unless income taxes were reduced by one-third, “our kids will be living in the equivalent of Ethiopia.” Yet sometimes the hyperbole falls away, and Laffer seems to acknowledge the danger of politicians running too far with his simple insight. “The Laffer Curve is really a pedagogic device,” he says. “It’s not something to be too literal.”
[Reagan took it literally, and look what happened]
In the late 1970s, the Laffer Curve popularized the theory that if the top marginal tax rate were above its optimal point, a tax cut would increase total revenue. In practice, the 1981 Reagan tax cuts left revenues about 30 percent below where they would have been if rates hadn’t changed, says Lawrence B. Lindsey, director of the National Economic Council in the Bush Administration. The Bush tax cuts cost $1.5 trillion in lost revenue over 10 years, the Congressional Budget Office estimated last year. “The notion that a broad decrease in tax rates raises revenue was never taken seriously by professional economists,” says Alan D. Viard, who worked for the Treasury Dept. on tax issues in the George W. Bush Administration and is now at the American Enterprise Institute in Washington.
http://www.businessweek.com/magazine/the-gop-heads-straight-for-the-laffer-curve-07212011.html

See also:
The Laffer Curve debunked
http://blogs.ajc.com/jay-bookman-blog/2010/09/14/the-laffer-curve-debunked-part-one/

Now about this (“just a left wing site”):

About The Citizens for Tax Justice
Our Mission

Citizens for Tax Justice, founded in 1979, is a 501 (c)(4) public interest research and advocacy organization focusing on federal, state and local tax policies and their impact upon our nation. CTJ's mission is to give ordinary people a greater voice in the development of tax laws. Against the armies of special interest lobbyists for corporations and the wealthy, CTJ fights for:

Fair taxes for middle and low-income families
Requiring the wealthy to pay their fair share
Closing corporate tax loopholes
Adequately funding important government services
Reducing the federal debt
Taxation that minimizes distortion of economic markets


I can’t argue with any of that; in fact, I agree with all of it – just what we need.


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PostSubject: Re: Laffer and Moore: A 50-State Tax Lesson for the President   Mon Apr 23, 2012 3:13 pm

It's kind of nice in my view to have people to say good morning and hope your day is great, be supportive, and have local friends instead of all the fighting and ridiculousness everywhere else. But I guess with elections coming up it was too much to hope. No But I can just not read threads of course. Yes

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PostSubject: Re: Laffer and Moore: A 50-State Tax Lesson for the President   Mon Apr 23, 2012 4:53 pm

Sync, lmm and prop aren't mad. They loooove debating politics. It's like crack for some people. Crackingup Crackingup Crackingup Crackingup OHHH, I kill me and lmm might as well if I keep picking. Giggle

Love y'all! Hug
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PostSubject: Re: Laffer and Moore: A 50-State Tax Lesson for the President   Mon Apr 23, 2012 4:56 pm

I know they aren't...it has just begun...lol. Anyway, no one makes anyone read any particular threads. I'll just hang out in the happy ones yay
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PostSubject: Re: Laffer and Moore: A 50-State Tax Lesson for the President   Mon Apr 23, 2012 5:04 pm

Coolio. Kitty

I'm not much of a politics debater, mainly because I hate politics. I like analyzing literature, math, crime, religion and the human mind though. So I get it.

But yeah, I dread the flooding of media with politics. I see both sides as corrupt. I do like Obama, don't always agree with him, but see that he at the very least attempts to see the views of all those he represents. He almost got my vote last election...good chance he will have it next go around. I haven't had time to do my homework yet. Wink
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PostSubject: Re: Laffer and Moore: A 50-State Tax Lesson for the President   Mon Apr 23, 2012 5:10 pm

I will be voting for him again, and considering the nastiness from all sides that shows a lot of trust here for me to even say that. I can't stand when people start calling names and making fun of any side...we should be working together to solve problems, and since I don't plan to call names or make fun of anyone else's opinions and candidates I either end up biting off my tongue, feeling bullied, or I leave. I know some do talk civilly...not saying that no one does. Yes I just don't debate politics or religion...they are way similar to each other...lol. But I do know some like to and cool the places to do so are available. So I just do my thing and let everyone do theirs yay
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PostSubject: Re: Laffer and Moore: A 50-State Tax Lesson for the President   Mon Apr 23, 2012 5:28 pm

The Propagandist wrote:
[color=orange]Howdy, old friend. I have expanded my range of forums to visit so I don't make it back around as often as I did. It is interesting to see the wide range of viewpoints available at different sites. One time while reading, one opinion struck my "shock and disbelief" laugh button, and I spit my mouthful of beer all over the keyboard. That ended my chatting 'til I could replace it.

Meanwhile, about Arthur Laffer and his now-debunked "curve," which now resides out there amongst Bigfoot and UFOs ...


Well, to each his own, I guess. Economics is such a mess to understand I won't even pretend to get most of it. Laffer and Moore make sense to me. Maybe I am ignorant, I don't know, but it seems that the past has shown that each policy works at one time or another. Supply side economics is easy to see evidence of. High taxes, lower revenues can also be shown.
The fable of the rich don't pay taxes just gets under my skin. Even with all wealthy taxed at 100%, you don't solve the problem. Since both sides use the same set of data to make their claims, you have to wonder 'what is the right answer'?
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PostSubject: Re: Laffer and Moore: A 50-State Tax Lesson for the President   Tue Apr 24, 2012 6:56 pm

Joy wrote:
I like analyzing literature, math, crime, religion and the human mind though.

Me, too! This pony knows more than one trick. I'll bet we could make beautiful conversation together.



But be warned! I play the devil's advocate sometimes. Maybe I'm a true believer in the positions I defend, or maybe I just take the position because nobody else has. I have learned to think like a lawyer and can argue both sides of a question with equal fervor. scratch
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PostSubject: Re: Laffer and Moore: A 50-State Tax Lesson for the President   Wed Apr 25, 2012 5:11 am

Okay then! I will remember that next time I am mulling something over in my mind and post it here. Very Happy
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PostSubject: Re: Laffer and Moore: A 50-State Tax Lesson for the President   Wed Apr 25, 2012 8:12 am

You sound like me Prop. I took a debate class in high school. The teacher would ask which side I wanted and I would tell him to let the others pick and I would take whatever was left. I love a good friendly argument.
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PostSubject: Re: Laffer and Moore: A 50-State Tax Lesson for the President   Wed Apr 25, 2012 9:11 am

Bluetick wrote:
You sound like me Prop. I took a debate class in high school. The teacher would ask which side I wanted and I would tell him to let the others pick and I would take whatever was left. I love a good friendly argument.

I did that in a college debate class one time. Sometimes it's fun to be the adversary.

Prop, science is my thing, I am still learning politics. One thing for sure in politics, never believe anything they say. Look at what they have actually done or not done and why.
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PostSubject: Re: Laffer and Moore: A 50-State Tax Lesson for the President   Wed May 09, 2012 8:02 am

lmm wrote:
Bluetick wrote:
You sound like me Prop. I took a debate class in high school. The teacher would ask which side I wanted and I would tell him to let the others pick and I would take whatever was left. I love a good friendly argument.

I did that in a college debate class one time. Sometimes it's fun to be the adversary.

Prop, science is my thing, I am still learning politics. One thing for sure in politics, never believe anything they say. Look at what they have actually done or not done and why.

"One thing for sure in politics, never believe anything they say."

Trust, but verify.
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PostSubject: Re: Laffer and Moore: A 50-State Tax Lesson for the President   Wed May 09, 2012 10:43 am

The Propagandist wrote:


But be warned! I play the devil's advocate sometimes. Maybe I'm a true believer in the positions I defend, or maybe I just take the position because nobody else has. I have learned to think like a lawyer and can argue both sides of a question with equal fervor. scratch

LOL, that's what I have always liked about you. I have lurked around several forums and followed your posts. I always got the feeling your underlying "mission" was to make people stop and actually affraid think "about it"............
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