Romney may have Chris Christie in his corner, but Herman Cain has something more significant in my view – Economist Arthur Laffer came out in favor of the candidate’s “9-9-9” plan in the pages of the Wall Street Journal today. That’s the Arthur Laffer of “The Laffer Curve.”
From the WSJ:
A static revenue-neutral tax change requires static winners and losers. And this 9-9-9 plan has made certain that even on static terms those below the poverty line will be better off—period. Once the dynamics take hold, many of those below the poverty line will find good jobs and thus will rise above the poverty line and start paying taxes.
This is the type of tax increase I wholeheartedly support. I support collecting more in taxes from people with high incomes who choose to actually pay taxes at lower tax rates than use lawyers and accountants to avoid taxes at higher tax rates. Some tax revenues at low tax rates is a heckuva lot better than no tax revenues at high tax rates.
While the 9-9-9 plan has captured people’s imaginations at this moment, it’s not all that different from California Gov. Jerry Brown’s 13% flat tax when he ran for president in 1992. As you may recall, he came in second behind Bill Clinton in the Democratic Party primary.
In 1986, President Reagan passed a major tax-reform bill that lowered to 28% from 50% the top marginal personal income tax rate. The Tax Reform Act of 1986 also raised the lowest marginal income tax rate to 15% from 11% and closed many loopholes, making for a flatter tax structure. Reagan’s bill passed the Senate in a landslide 97-to-3 vote. Who says a flat tax can’t be a bipartisan proposal?
Still, a number of my fellow economists don’t like the retail sales component of the 9-9-9 plan. They argue that, once in place, the retail rate could be raised to the moon. They are correct, but what they miss is that any tax could be instituted in the future at a higher rate. If I could figure a way to stop future Congresses from ever raising taxes I’d do it every day of the week and twice on Sunday. Until then, let’s not make the perfect the enemy of the good.
Read the whole thing. You’ll learn ten times more than all the debates rolled into one. (I know – that’s not hard.)
UPDATE: Dick Morris another fan of “9-9-9.”