This is a great book and its timing is perfect…..
Steve Moore and Arthur Laffer take the reader on an easy to follow explanation of supply side economics and its results. Readers get a modern day history of taxes and their effect on the economy. What this is not is an politically biased book. For instance:
– The authors heap praise on Democrat John F. Kennedy for his huge tax cuts in office and for the effect they had for the remainder of the 1960’s. They quote Kennedy:
“Our true choice is not between tax reduction, on the one hand, and the avoidance of large Federal deficits on the other…..It is between two kinds of deficits- a chronic deficit of inertia, as the unwanted results of inadequate revenues and a restricted economy- or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, produce revenues, and achieve a budget surplus. The first type of deficit is a sign of waste and weakness- the second reflect an investment in the future.”
– They make no bones at all pointing out the various failure of the Nixon, Ford and Carter administrations. For those keeping score those are two Republican and one Democrat. Those chapter are actually very interesting because those listening to the news today are hearing some of the same ideas being bantered about. Guys, it was a bad movie the first time, we do not need to see it again. If you get the book (you should), pay close attention to these chapters.
– Regan receives deserved praise for the tax cuts of the early 1980’s that created the near 20 year bull market in both stocks and the economy.
– After pointing out the mistakes of his first two years in office, the authors give Democrat Bill Clinton credit for reducing taxes in 1995 and the resulting economic surge from it.
The authors also give Clinton credit for welfare reform. In 1995 the Cato Institute did a study that showed a welfare recipient would need to make $12 to $15 an hour to replace the aid they received . In 1994, the New York Post ran a similar study that said a NYC worker would have t make $5k a year to replace all the welfare benefits. Worse, was the income offset of the program. Should a welfare recipient find a job, there was a near 100% offset in benefits, in essence a 100% income tax.. Why work if that income was going straight to the government? The news system, with its work requirement caused the number of families receiving welfare to drop from near 5 million to under 3 million in a decade.
– They do take a grim view of Obama simply because the book was finished earlier in the year. Obama seems to have come off some of his earlier statements and the authors do acknowledge that candidates say what they have to to get elected and may perform differently in office. In other words, the jury is out until results are in.
For statistical junkies there is plenty on the book to sink your teeth into. The authors show how the states with the lowest income tax rates are also the states with the most robustly growing economies. Detailed is how high tax rates in California have lead to a “millionaire exodus” from the state, crippling its budget. Where did they go? Nevada and New Mexico, states that offer far lower tax rates.
On a global scale, the authors illustrate how corporate tax rates are plummeting around the globe as nations compete for business and investment capital. Said the Prime Minister of Scotland, “Supply side economics works, we’ve seen that in Ireland. Their low rates are attracting all capital of Europe and if we want to compete our rates need to fall near theirs”. How much capital? Over 1,000 companies have moved into Ireland during the 1990’s. Ireland enjoyed budget surpluses and saw the hourly manufacturing wage grow 126%, unemployment fell from 18% to 5%, for the first time since the potato famine Ireland is seeing an annual influx of educated workers and on a per capita basis, the Irish are over twice as rich as they were in the 1980’s.
It is so good in Ireland that EU bureaucrats are complaining that the Irish are “tax poaching” to attract capital and business….so tax rates do matter?
15% flat taxes around the globe are being hailed as the reason for explosive growth in formerly stagnant nations like Ireland, Russia, Hong Kong and others. It also points out the US now has the second highest corporate tax rate in the world. They illustrate that the US is not, despite it highly qualified work force the prime place for manufacturing jobs due to it high corporate tax rate. We are not talking about jobs that build Barbie Dolls, we are talking about skilled manufacturing jobs in computers and semi-conductors and the like.
Supply side economics is not about eliminating taxes. Clearly they are needed for the gov’t to function. What it is about is finding a tax rate that does not punish entrepreneurial behavior and success and promotes income avoidance. The lower the penalty on the next dollar you make or save, the more of them you will strive for. It have been proven time and time again the government in that case always ends up making more money. Why? Because we all do…
Here is the book…please read it