Tuesday, September 22, 2009

Laffer's Warning

Economist Arthur Laffer, from the Wall Street Journal today:
In 1930-31, during the Hoover administration and in the midst of an economic collapse, there was a very slight increase in tax rates on personal income at both the lowest and highest brackets. The corporate tax rate was also slightly increased to 12% from 11%. But beginning in 1932 the lowest personal income tax rate was raised to 4% from less than one-half of 1% while the highest rate was raised to 63% from 25%. (That's not a misprint!) The corporate rate was raised to 13.75% from 12%. All sorts of Federal excise taxes too numerous to list were raised as well. The highest inheritance tax rate was also raised in 1932 to 45% from 20% and the gift tax was reinstituted with the highest rate set at 33.5%.

But the tax hikes didn't stop there. In 1934, during the Roosevelt administration, the highest estate tax rate was raised to 60% from 45% and raised again to 70% in 1935. The highest gift tax rate was raised to 45% in 1934 from 33.5% in 1933 and raised again to 52.5% in 1935. The highest corporate tax rate was raised to 15% in 1936 with a surtax on undistributed profits up to 27%. In 1936 the highest personal income tax rate was raised yet again to 79% from 63%—a stifling 216% increase in four years. Finally, in 1937 a 1% employer and a 1% employee tax was placed on all wages up to $3,000.

Because of the number of states and their diversity I'm going to aggregate all state and local taxes and express them as a percentage of GDP. This measure of state tax policy truly understates the state and local tax contribution to the tragedy we call the Great Depression, but I'm sure the reader will get the picture. In 1929, state and local taxes were 7.2% of GDP and then rose to 8.5%, 9.7% and 12.3% for the years 1930, '31 and '32 respectively.

The damage caused by high taxation during the Great Depression is the real lesson we should learn. A government simply cannot tax a country into prosperity. If there were one warning I'd give to all who will listen, it is that U.S. federal and state tax policies are on an economic crash trajectory today just as they were in the 1930s. Net legislated state-tax increases as a percentage of previous year tax receipts are at 3.1%, their highest level since 1991; the Bush tax cuts are set to expire in 2011; and additional taxes to pay for health-care and the proposed cap-and-trade scheme are on the horizon.

We CANNOT provide health care for 30 million people without raising taxes, either directly or indirectly. Our economy CANNOT afford a tax increase at this time, with nearly 10% unemployment (closer to 20% if you count the underemployed and those who have quit looking for work).

Providing health care for 30 million people doesn't do us any good if they cannot find jobs to pay for simple necessities of life like food.

If Obama is lying about not raising taxes to pay for his health care plan, and I have every reason to believe he is since he has before, then we need to stop this public option nonsense immediately. Frankly, I would even go so far as to end the business deduction for health insurance. But I will settle for simply ending the socialist stupidity from the Democrats.


Anonymous said...

Federal health care reform is not about debated congressional bills, though they are a part of the picture. It is not about the congressional budget office, though the move will be costly. Health care reform isn’t even really about the arguments between republicans versus democrats; since both sides of the congressional isle have not told you the painted the whole picture and neither side have told you the actual story. Both sides are working to create the system, to erect the shocking changes coming down the pike, and affecting each and every American. In that light, it is important, in order to formulate an accurate opinion, that we know what is headed our way.
So what is health care reform really about? It is about something called personalized health care. Here is the definition, as listed on the government’s website.
Personalized health care describes medical practices that are targeted to individuals based on their specific genetic code in order to provide a tailored approach. These practices use preventive, diagnostic, and therapeutic interventions that are based on genetic tests and family history information. The goal of personalized health care is to improve health outcomes and the health care delivery system, as well as the quality of life of patients everywhere. http://www.hhs.gov/myhealthcare/glossary/glossary.html
Hence, health care reform is about seizing and capturing, your genes or your DNA - your genetic makeup- and invading your blood line. It is about mapping out your total genetic code, called the genome, to determine which diseases are concealed in your genes. They are forcing all of us to sign up, all in the name of relieving illness and alleviating suffering. But there is more.
Health care reform is about getting officially authorized clearance for the federal government to store your health record, personal information and genetic code, on a vast interstate, network of computers, in a system they are still erecting; a system that more than rival America’s the railroad system; a system that, like medusa turned gorgon, with tentacles reaching into every industry in America and extremities extending into every live in this country. In fact, the massive network of computer systems is characterized on the health and human services website as ‘the network of all networks’.
Therefore, health care reform is personalized health care involves sharing your health information across the nation, with every hospital in the country, scientists, pharmaceutical companies, insurers and many other stakeholders, all residing and interacting within a massive matrix that will literally and fundamentally transforming our Constitutional America; into a collective, cradle to grave government, and society.
However, this personalized version of health care is not unique to America; it’s happening with governments across the globes, all riding on the backs of scientific progress and medical innovations. From hhs.gov:

EdMcGon said...

You give them far too much credit for planning. I don't think our politicians are that smart.