He helped expand freedom, and he was given a Presidential Medal of Freedom. President Trump awarded Arthur Laffer a Presidential Medal of Freedom this week. Dan Mitchell writes:
I’m a big fan of the Laffer Curve, which is simply a graphical representation of the common-sense notion that punitively high tax rates can result in less revenue because of reductions in the economy-wide level of work, saving, investment, and entrepreneurship.
This insight of supply-side economics is so obviously true that even Paul Krugman has acknowledged its veracity.
What’s far more important, though, is that Ronald Reagan grasped the importance of Art’s message. And he dramatically reduced tax rates on productive behavior during his presidency.
And those lower tax rates, combined with similar reforms byMargaret Thatcher in the United Kingdom, triggered a global reduction in tax rates that has helped boost growth and reduce poverty all around the world.
In other words, Art Laffer was a consequential man. [...]
Many folks on the left today criticize Art for being too aggressiveabout the location of the
revenue-maximizing point of the Laffer Curve. In other words, they disagree with him on whether certain tax cuts will raise revenue or lose revenue.
While I think there’s very strong evidence that lower tax rates can increase revenue, I also think it doesn’t happen very often.
But I also think that debate doesn’t matter. Simply stated, I don’t want politicians to have more revenue, which means that I don’t want to be at the revenue-maximizing point of the Laffer Curve.
Moreover, there’s a lot of economic damage that occurs as tax rates approach that point, which is why I often cite academic research confirming that one additional dollar of tax revenue is associated with several dollars (or more!) of lost economic output.
Call me crazy, but I’m not willing to destroy $5 or $10 of private-sector income in order to increase Washington’s income by $1.
The bottom line is that the key insight of the Laffer Curve is thatthere’s a cost to raising tax rates, regardless of whether a nation is on the left side of the curve or the right side of the curve.
[Dan Mitchell, “A Tribute to Art Laffer,” International Liberty, June 20]
