January 27, 2012

 

 

‘Reagan’-miniscing
by Bruce Rodgers

As Sam Brownback continues to plow the state with new policy ideas in his quest to become Kansas’ greatest 19th century governor, he does turn to 20th century notables for advice.

 

Recently, Brownback turned to Dr. Arthur Laffer to help explain the benefits of the governor’s proposals to the state’s tax structure. Laffer is best known for the Laffer Curve, a concept that points to a relationship between tax rates and government revenue. As an economic theory, it postulates that at a certain point the tax rate will be counterproductive to tax revenue — be it, lower taxes makes for higher government revenues. Businesses benefit and create jobs, bringing along prosperity.

 

As a member of the Reagan administration’s Economic Policy Advisory Board (1981-1989), Laffer bought his Laffer Curve and supply-side economics to the Kansas Senate and House Tax committees last week.

 

The Republican-dominated legislature treated Laffer with varying degrees of respect, from polite, knowledgeable questioning centered on Brownback’s tax proposals that Laffer supports to wide-eyed enthusiasm seemingly accorded someone who had “walked with Ronald Reagan.”

 

In the Senate tax committee hearing, the only challenge to Laffer reportedly came from Kari Ann Rinker representing the National Organization of Women. She asked Laffer to justify Brownback’s want of eliminating the state’s earned income tax credit, which benefits the poor. During his House tax committee visit (which I attended), Republicans asked the questions. Democrats on that committee were apparently too involved in digesting their Subway sandwiches and Diet Cokes to direct any skepticism Laffer’s way.

 

Laffer seems to thoroughly enjoy his star status. Prior to testifying, he introduced himself to individual committee members in a causal, relaxed manner. At 72, Laffer looks 10 years younger, no doubt bringing on the question from some attending the hearing if he dyes his hair. Short in stature but with body language that oozes confidence, Laffer reminded me of a Joe Pesci without the actor’s tics and rapid-fire East Coast verbal delivery.

 

Laffer came without notes or props of any sort. This prompted me to asked the Wichita Eagle reporter who sat next to me what Laffer talked about at the Senate committee hearing. Deadpan, he answered, “mostly about his book.”

 

That response left me wondering how Laffer writes his books since he didn’t have a laptop or even a smart phone in front of him. After quickly mentioning his newest book to be published, Eureka — focusing on the economic history of California — in his opening statement, Laffer gave me an answer of sorts.

 

Laffer said he didn’t own a computer, adding with a grin, “Yet, I’m planning on getting one in ten to twelve years.”

 

That statement had me asking myself why Gov. Brownback is paying Laffer $75,000 for his advice and help on Kansas tax policy issues when Laffer’s main technological tool for research may be a pencil and an adding machine. But I had to conclude that since Laffer is chairman of Laffer Associates based in Nashville, TN, he probably hired staff members who could boot up a computer.

 

Much of Laffer’s testimony and responses to questions from committee members centered on the research Laffer did for his new book. The data collected, he said, showed that states with low or no income tax had a higher “growth variable” than states with higher income tax rates.

 

“It’s the thing that jumps off the page,” he said. “The differences are just huge.”

 

Overland Park Republican Marvin Kleeb brought up to two words that make the GOP cringe: “class warfare.” Kleeb was likely thinking about the earlier Senate hearing and the challenge to Laffer about the proposal to drop the earned income tax credit.

 

Laffer was smoothly Reaganesque in his response. “I understand the earned income credit,” he said. “It’s more advantageous to those that work to have more effective ways to help. We’re never going to achieve prosperity through handouts.” Then Laffer added, “In revenue structural change there’s always winners and losers.”

 

The bulk of the remaining questions from Republican committee members had to do with keeping certain business and personal tax credits while lowering the tax rate. Laffer didn’t argue but he repeatedly made his case for Kansas dropping its income tax altogether or considering some sort of flat tax structure.

 

A day after the committee hearings with Laffer, Republican legislative leaders announced a revised tax plan keeping some of Brownback’s tax proposals, including eliminating the earned income tax credit, but not making a change to the corporate tax rate. Brownback wants to eliminate non-wage income taxes for limited liability corporations, sole proprietorships and subchapter S corporations.

 

On January 24, the Center on Budget and Policy Priorities issued a report stating that Brownback’s plan — and much of the Republican revised plan — would largely benefit large corporations and not create jobs. It stated:

 

“At the same time, the proposals would cost the state, at minimum, $266 million or more in annual tax revenue that the state otherwise could be using to strengthen its economy.”

 

Meanwhile, given the conservative wave of economic reform splashing across the nation, Laffer is riding a crest of heightened interest in his economic theories, including advising the Show-Me-Institute in Missouri on its push to end the state income tax and even having critics of South African President Jacob Zuma chastising that head of state for not having “a somewhat greater grasp of the role of taxation in society” by understanding the Laffer Curve.

 

Even without a computer, Laffer probably knows of such economic stirrings he’s associated with. Most of that information also is available in print.

Bruce Rodgers can be contacted at publisher_editekc@kcactive.com.