Arthur Laffer

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Arthur B. Laffer

Arthur Betz Laffer (born August 14, 1940) is an American economist who first gained prominence during the Reagan administration as a member of Reagan's Economic Policy Advisory Board (1981–89). Laffer is best known for the Laffer curve, an illustration of the theory that there exists some tax rate between 0% and 100% that will result in maximum tax revenue for governments. Laffer is Policy Co-Chairman (with Lawrence "Larry" Kudlow) of the Free Enterprise Fund.

Quotes 2004[edit]

  • While discussing President Ford's ‘WIN’ (Whip Inflation Now) proposal for tax increases, I supposedly grabbed my napkin and a pen and sketched a curve on the napkin illustrating the trade-off between tax rates and tax revenues. Wanniski named the trade-off ‘The Laffer Curve.’
  • I used the so-called Laffer Curve all the time in my classes and with anyone else who would listen to me to illustrate the trade-off between tax rates and tax revenues.
  • In 1994, Estonia became the first European country to adopt a flat tax, and its 26 percent flat tax dramatically energized what had been a faltering economy. Before adopting the flat tax, the Estonian economy was literally shrinking. In the eight years after 1994, Estonia experienced real economic growth - averaging 5.2 percent per year.
  • People do not work, consume, or invest to pay taxes. They work and invest to earn after-tax income, and they consume to get the best buys after tax. Therefore, people are not concerned per se with taxes, but with after-tax results. Taxes and after-tax results are very similar, but have crucial differences.
  • Over the past 100 years, there have been three major periods of tax-rate cuts in the U.S.: the Harding-Coolidge cuts of the mid-1920s; the Kennedy cuts of the mid-1960s; and the Reagan cuts of the early 1980s. Each of these periods of tax cuts was remarkably successful as measured by virtually any public policy metric.

Quotes 2007[edit]

  • The minimum wage is the black teenage unemployment act. It is the guaranteed way of holding the poor, the minorities and the disenfranchised out of the mainstream is if you price their original services too high.
  • You know, without China there is no Wal-Mart and without Wal-Mart there is no middle class and lower class prosperity in the United States.
  • Which would you rather have, capital lined up on your borders, trying to get into your country or trying to get out of your country? We are the capital magnet of this planet and we are the savior for not only people, for not only freedom, but also for capital.
  • The trade deficit is the capital surplus and don't ever think of having a capital surplus as being a bad thing for our country.

Quotes 2009[edit]

  • If you like the post office and the Department of Motor Vehicles and you think they're run well, just wait till you see Medicare, Medicaid and health care done by the government.

Quotes 2010[edit]

  • Resources don’t miraculously materialize out of thin air,… there is no free lunch.
    • Return to Prosperity: How America Can Regain Its Economic Superpower Status, Simon and Schuster, (2010) p. 42
  • And you can’t have a prosperous economy when the government is way overspending, raising tax rates, printing too much money, over regulating and restricting free trade. It just can’t be done.
  • In the 1990's, we had the largest cut in government spending as a share of GDP in the history of the U.S. In the 1990's, we were doing free trade, we passed NAFTA, we went through there. We were for lowering interest rates and controlling money far better. And we weren't regulating nearly as much. We had welfare reform and all of those wonderful things. We had the biggest tax cut in our nation's history. Any comparison between today and the 1990's, it's totally inappropriate. Bill Clinton, as bad a person as he was, was a good president.

Quotes 2011[edit]

  • Stimulus packages don’t work. Every president that I have ever heard of has wanted a free lunch. They just don’t get it.

Quotes 2012[edit]

  • I don’t think we have to do it by government spending. My view is I’ve never heard of a poor person spending himself into prosperity. The government doesn’t create resources. The government redistributes them, and it redistributes them from workers and producers to people they get the resources based on some characteristic of the work effort. So what you really need to do is I think you need to incentivize producers, and what you need to go along, and my way of going would be Simpson-Bowles. Something to lower the tax rates, broaden the base, get rid of the loopholes. I mean really get a production base that officially starts, and that’s the way you really get out of this depression. The way we did in the Eighties to be honest with you.
  • As my former colleague Milton Friedman used to say, ‘Government spending is taxation, pure and simple.’ Governments, when they spend the money, not only add to demand, they also reduce demand by taking the resources from the rest of society.
  • Government doesn’t create resources. Government redistributes resources. For everyone the government bails out, there is someone they put into trouble dollar for dollar. You can’t bail someone out of trouble without putting someone else into trouble.
  • Governments are raising taxes for austerity and that doesn’t work. Poor people cannot spend themselves into wealth and governments cannot tax their economies into prosperity. If you tax people who work, and pay people who don’t work, don’t be surprised if you find a lot of people not working…
  • Both sides have a bad incentive. The people you tax, who do work, they are going to stop working. The people who learn to live getting income without working, they are going to work less too.
  • It's not Republican, it's not Democrat. Honestly, it's not liberal, it's not conservative ... It's economics … If you tax people who work and you pay people who don't work, don't be surprised when you get a lot of people not working.

Quotes 2013[edit]

  • California is the highest-tax state in the nation and has been for a long time. It has the highest paid teachers in the nation, by far — $400 a month more than New Jersey — and yet California is the third lowest state on test scores for fourth and eighth grade English and math in the nation, and has been at the low level for a long, long time.
  • As my former colleague Milton Friedman often said, ‘Government spending is taxation.’ Beyond the essential services government provides — such as roads, courts, schools, police and fire services, and the military — government spending doesn’t actually create resources. It just redistributes resources. For every beneficiary of government largesse, there’s someone who pays for that largesse.
  • Nations with the greatest stimulus spending had the deepest recessions — while those with the least stimulus spending performed the best. The bigger the spending stimulus, the slower the recovery. I also showed historically that spending has never been associated with faster growth of the US economy.
  • In the 1970s, the more Congress spent, the higher unemployment rose, and it was not until government spending and taxes were cut in the early 1980s that unemployment started its long-term decline.

Quotes 2015[edit]

Quotes 2018[edit]

  • Don’t confuse fiscal discipline with party label. All those parties are all fiscally unsound. I mean, every Republican wants to spend more. Every Democrat wants to spend more. It is not their money… They’re spending your money and my money.

Quotes 2019[edit]

About Arthur Laffer[edit]

  • The idea of cutting tax rates to spur business comes from the economist behind Ronald Reagan’s ‘Reaganomics’ tax cuts, Arthur Laffer… The Laffer Curve delivers a simple, seemingly obvious message: When the tax rate is zero percent, government will collect nothing from the earnings it taxes. When the tax rate is 100 percent, the curve also shows the government collecting zero revenue because there will presumably be no earnings: who would work if they kept absolutely none of what they earned?
  • Laffer, 74, is best remembered for the ‘Laffer Curve,’ which he scribbled on a napkin in 1974 to illustrate the negative effect of high tax rates on government revenues. If you hike taxes beyond a certain rate—a sweet spot, so to speak—then you end up collecting less revenue, he argued.
  • It just isn't going to work, and it's very interesting that the man who invented this type of what I call a voodoo economic policy is Art Laffer, a California economist.

External links[edit]

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