Collapse forecasted by Arthur Laffer when Bush tax cuts expire in 2010

Arthur Laffer is predicting the U.S. economy will collapse next year when George W. Bush tax cuts expire in 2010. His theory on the Obama tax plan is depending on how the super-rich can choose when and the way they collect their income to evade taxes. Laffer believes the economy is doing better this year than it really should be doing because these aristocrats are collecting more of their loot and spending more of their money before taxes rise. He says that when taxes go up, Americans who can will choose to make a lot less money, thus reducing the government’s tax revenue.

Article Resource: Arthur Laffer predicts collapse when Bush tax cuts expire in 2010

Expired Bush tax cuts 2010

Arthur Laffer became famous when he influenced the Reagan administration to cut taxes. His Laffer Curve concerning taxes appears in some of the economic textbooks. Laffer, in his Wall Street Journal column, said that all of the Reagan tax cuts brought the economy out of what was the worst U.S. recession since the Depression -- until the Mt. Everest recession we're nevertheless trying to get out of now made that one look like just a speed bump. He said when tax cuts went into effect on Jan. 1, 1983 the economy took off like a rocket, with average real growth that was reaching 7.5 percent in 1983 and also 5.5 percent in 1984. He doesn't mention how all of the Bush tax cuts in 2001 and 2003 within the face of two wars eventually ran the U.S. economy to the ground and destroyed a budget surplus he inherited from Bill Clinton.

The curveball for Arthur Laffer

The Laffer Curve tax cut argument misleads his readers, as reported by Asha Bangalore at Northern Trust. As another recession set in after the huge Reaganonomic era, Bangalore wonders why the economy posted substantial growth after tax increases were implemented by Bill Clinton in 1993. A revival of bank lending following the Reagan hangover led to self-sustained growth despite all of the tax increases. Bangalore also points out that if the Laffer Curve theory about tax cuts is valid, the U.S. economy would have done much better than the weakest period of economic expansion in history following the Bush tax cuts of 2001 and 2003.

Obama tax plan lower than Reagan's

Also, Arther Laffer's predictions of economic collapse when tax cuts expire in 2010 seems to be questioned by The Motely Fool. In his column Laffer explains that we're all going to die when the highest federal personal income tax rate goes to 39.6 percent from 35 percent. The Fool thinks that it's worth noting that the 1983 cuts Laffer remembers so fondly lowered top rates from 69.13 percent to 50 percent. Top marginal tax rates that are under all but one year of Ronald Regan's presidency were a lot more than 50 percent. The Obama tax plan wants to revert the highest personal income tax rates to be somewhere around 39.6 percent, where they were in the '90s when the economy boomed and the government collected more taxes than it spent.

Your pain felt by Arther Laffer

Arther Laffer, the chairman of an investment consulting firm and therefore is very wealthy, is making predictions of economic collapse from a very narrow point of view. Bangalore goes further to point out that all of the obstacles the economy will face in 2011 have little to do with tax increases. A severe credit crunch and housing market challenges are factors that may have far greater influence on the economy. Most people will keep their head up and make an effort to survive. But when Arthur Laffer's personal income tax rate goes up 5 percent, the millions he won't pocket might seem to him like the end of the world indeed.

Citations

Wall Street Journal

online.wsj.com/article/SB10001424052748704113504575264513748386610.html?mod=WSJ_latestheadlines

Northern Trust

northerntrust.com/pws/jsp/display2.jsp?XML=pages/nt/0601/1138283678319_6.xml&TYPE=interior&er=dgcDetail&c=primary/resource/1006/1275944180574_442.xml

Motley Fool

caps.fool.com/Blogs/ViewPost.aspx?bpid=403124&t=01003534026331805883