Laffer Wants to Raise At Least One Tax: Art Laffer along with Donna Arduin released some fantasy called Pro-Growth Tax Reform and E-Fairness that claims that if we would tax Internet sales then we could have a huge increase in output and employment by 2022 if we used the extra sales taxes to reduce income taxes:Gross domestic product would grow by more than $563 billion, creating 1.5 million jobs nationwide.
I just read what Laffer and Donna Arduin wrote and there really isn’t much there to support this conclusion. They note that after 1999, real GDP growth fell far short of the 3.5% per annum growth rates we enjoyed for much of the latter half of the 20th century. Then again – didn’t we try lower tax rates starting in 2001? How did that work out? A lot of conservatives seem to love this idea and why not. Sales taxes tend to be regressive while income taxes tend to be progressive. A switch from income taxation to sales taxation fits the bill if one wants a more regressive tax system. But to claim that this would lead to some magical surge in economic growth rates is a real Laugher.