Noted economist Arthur Laffer was hosted by Fickling and Company. The architect of the Laffer Curve and supply side economics, the intellectual basis of the Reagan revolution related why he thinks the tax policy of the candidates is so critical.

The critical measurement is the incremental tax rate on the wealthy; what will the next dollar of income yield the risk taker. The wealthy are focused on this and this will stimulate or kill incentives to produce and grow. The loss of static revenue from a tax cut is more than offset by the greater production of taxable income and thus tax revenues. This has been proven repeatedly by IRS tax revenues from the last century of tax cuts.

The richest 1% have seen their tax revenue as a % of GDP double during the last few decades of tax cuts. This is the only income group showing this increase;

Tax cuts on the lower income at the lower rates also generate loss of static revenues with no offsetting production of more taxable income and thus tax revenues.

This means that the tax plans proposed by Hillary, Obama, and Edwards would likely lead to dramatically reduced revenues and a fiscal crisis. Laffer voted for Bill Clinton twice and supports Bush’s tax policy.

With the proposed extension of social security taxes to the full income range, the rise from letting the Bush cuts expire and the high rates of states like California the tax rate hits 60% depending on your location. This is an income killer. (Laffer recently moved from California to Nashville to escape their high tax rates.)

The recent tax rebates are a joke. The $600 stimulation will be offset by the loss in purchasing power from the people who will have to pay for those rebates.

Laffer expressed particular disappointment in the economists who are openly supporting these policies knowing they are fruitless and destructive, in order to gain political influence. The profession is becoming a lobbying group.

Gratitudes and tips to Roy Fickling and Fickling and Company for hosting this economic pathfinder.

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