I read the first few lines of the article in the OP’s post and thought, “This has gotta be Art Laffer.” Clicked on the link and… voila. But I digress…
I know Art. Which is to say that we’re acquainted because he was on the advisory board of a firm that I worked for for several years.
Anyhow, Art’s a VERY smart guy. There’s no debating that. But… he’s also the archetypal policy entrepreneur. Which is to say that his “lower taxes” message (which he’s been banging away at since the 1970s) is not just an opinion, it’s the core of his BUSINESS and LIVELIHOOD. I swear to you, the guy used to run an investment fund that invested in businesses based largely on what the tax regime was of the state where they were headquartered (and I believe a second fund that applied the same strategy internationally). In other words, taxes don’t just matter. They are almost the ONLY thing that matters. I *believe* that those funds have been shuttered for performance reasons, but they were up and running for quite a few years and the Laffers sucked a big pile a dough out of them. I thought the whole idea was ridiculous… but they worked out well for the Laffers, so what do I know.
Anyhow, sure taxes matter at the margin. And there’s a certain logic to the Laffer Curve. But the devil is in the details and the issue has always been, “OK, we acknowledge there’s a Curve, but WHERE is the optimal point on the curve with respect to tax policy.” And that’s where no one seems to agree, because it’s not very straightforward.
What has always bothered me a bit about Laffer is that he’s such a smart guy… but he just spent his entire career milking his one good observation like a one-trick pony. EVERYTHING to him is tax policy – it’s the only thing that matters. And for what it’s worth, he completely missed both the housing and stock market bubbles. I mean, completely. So I’d take what Laffer has to say with a grain of salt. If anyone on the planet has a predetermined agenda when he sits down to right, it’s Art Laffer. He’s got the objectivity of a mother regarding her son.
