Latest news with #ArthurLaffer
The National
4 days ago
- Health
- The National
Ian Murray's Laffer curve comments point to ignorance of economics
The Laffer Curve epitomises economists' quest for mathematical and scientific rigour and respect. A lot of economic data is collected and presented in the form of graphs from which relationships between variables may be deduced, but often without proper statistical evaluation of the accuracy or significance of the results. But at least there is data on which the calculations and predictions can be based, however unreliable. READ MORE: Meeting details between Ian Murray and Unionist think tank revealed The Laffer Curve purports to plot tax revenue against rate of taxation. It has only two points, one at either end of the baseline (or x-axis). Arthur Laffer postulated that there would be a line between these extremes, but the shape of it is entirely hypothetical. No data has ever been gathered to establish where intermediate points might lie, because to do so would be highly disruptive of the fiscal management of a country's economy. So the Laffer Curve is a figment of the imagination. Ian Murray's quoting of it is a worrying indication of a lack of knowledge or understanding of key economic concepts. Julian Smith Limekilns ANENT my recent observations on our failing NHS (Letters, Aug 9), it pains me to point out further inadequacies. In my previous letter I highlighted a case of a friend where a tissue biopsy was taken during an invasive procedure on January 24 but she still hadn't been informed as to whether the pathology was good or bad news. After great effort and much time spent telephoning hard-to-contact NHS admin staff, she discovered that a pathology report was created on the April 17 yet the correspondence to her on the subject was only generated very recently and was in the post. So my friend is still waiting, six months post-op, to discover whether she has a significant, possibly life-threatening, condition while the tissue sample and the result spent time sitting waiting to be attended to. In the same vein, another friend who is undergoing chemotherapy for a malignancy had a CT scan three weeks ago to monitor progress but has had her review appointment this week rescheduled because the CT scan has yet to be scrutinised by a specialist radiologist. In an ideal world, the CT could be reported on in real time, but for financial reasons everything is on hold – including the patient's state of mind for weeks until the scan is checked by a radiologist who wasn't present when the CT was taken but who could actually be based in Australia doing part-time NHS work. As I stated previously, I support the NHS wholeheartedly but it is underfunded, understaffed and stretching to provide a service to a standard it simply cannot achieve. When things are overstretched they break, and that is what is about to happen with our NHS if the basic problems are not dealt with. We deserve and pay for a first-class NHS but we don't get it. David J Crawford Glasgow CLARE Haughey's excellent but chilling account of the very real peril of creeping privatisation of our NHS (Aug 11) ought to make us all sit up and pay attention. Nothing can be comfortably assumed to be safe. And, on the watch of a soi-disant Labour government? How this ought to sicken us all, the more so when you remember that it was Attlee's post-war Labour administration that brought the NHS into being in the first place. And this precisely because preceding private healthcare simply did not serve people at all. READ MORE: Clare Haughey: If Labour win power in Scotland, what will they do to our NHS? Clare names and hopefully shames the beneficiaries of these obscene donations. This is indeed courageous. Good on you, Clare. I am reminded of two apposite things. Firstly, an acquaintance of mine recently spent some weeks in the USA. He suffered a fall, being knocked down by a cyclist. This required required a hospital visit to outpatients, and 11 stitches to a finger. Relatively minor, you might say, although, of course, unpleasant. For this he received a bill of $650, with a further $60 to be paid for post-treatment care. Luckily for him, his holiday insurance met most, if not all, of this. Secondly, those with a longer memory may recall studies undertaken by the World Health Organisation on at least two occasions that I recall, where the quality of healthcare received was compared over 39 countries. READ MORE: Three new cancer drugs approved for use by NHS Scotland On both occasions, the country offering the best care was France, and number 39 out of 39 was ... yes, you guessed correctly, USA. The UK came in at around half way, at 19. This being the case, why on earth would we wish to emulate a profit-driven broken system which serves none but the insurance companies and their bloated shareholders? Brian York Dumfries
Washington Post
31-07-2025
- Business
- Washington Post
Trump is using the ‘Laffer curve' to find the tariff sweet spot
In his first term, President Donald Trump awarded the Presidential Medal of Freedom to economist Arthur Laffer, inventor of the 'Laffer curve,' which provided the intellectual foundation for President Ronald Reagan's supply-side tax cuts. Now in his second term, Trump is essentially applying the Laffer curve to his tariff policies. The Laffer curve, which the economist famously drew on a napkin during a 1974 lunch with Donald H. Rumsfeld and Dick Cheney, shows that when you set tax rates at zero, you get zero tax revenue (because the government collects nothing), and when you set tax rates at 100 percent, you also get zero revenue (because no one has an incentive to work). Somewhere between zero and 100 percent is an optimal tax rate that achieves both growth and maximum tax revenue. Reagan applied this principle to lowering income tax rates — which were egregiously high when he took office — spurring 92 months of uninterrupted economic growth, the longest peacetime economic expansion in U.S. history and dramatic growth in federal revenue. Trump is applying the same principle to tariffs. Tariffs are taxes: When you have no tariffs, you get zero revenue, and when you impose tariffs of 100 percent (or more), it throttles trade and revenue. Somewhere between zero and 100 percent is an optimal tariff rate that yields maximum revenue without unduly disrupting trade. When Trump took office in January, U.S. tariffs were close to zero, which meant they brought in little tax revenue. Trump is negotiating trade deals that, instead of reducing tariffs, raise them to something approximating the revenue-maximizing tariff rate. Consider the deal he struck this week with the European Union. In 2018, Trump offered the Europeans a zero-for-zero trade deal, but the E.U. showed little interest in his proposal. Now, seven years later, Trump has struck a deal that includes a 15 percent baseline tariff on most European exports to the United States, while most U.S. exports to the E.U. will be duty-free. The E.U. also committed to purchasing $750 billion in U.S. energy and investing $600 billion in the United States by 2028. Some European leaders are complaining that the deal is heavily tilted to the U.S. They are right, but that is the price the Europeans pay for turning up their noses at Trump's zero-for-zero offer when it was on the table in 2018. Trump has also set minimum tariffs in other recent trade deals. His deal with Japan similarly includes a 15 percent baseline tariff, while his deal with Britain sets the baseline tariff at 10 percent. And his deal with Vietnam sets it at 20 percent. Trump says the baseline tariff rate for the world will be 'in the range of 15 to 20 percent … probably one of those two numbers.' What is the optimal rate? It's hard to know, but 10 percent is better than 20 percent — because, as the Laffer curve shows, if the baseline tariffs are too high, above a certain point the United States will get less revenue, not more, which is bad for the U.S. bottom line. There are exceptions. For example, the E.U. deal includes a 50 percent tariff on steel — far exceeding any revenue-maximizing rate. That is because Trump's goal in this case is not to bring in more revenue, but to reduce foreign steel imports and spur domestic production for national security purposes. That is why he has set steel tariffs at a protectionist level. Raising tariffs might seem like an improbable way of channeling Reagan's supply-side principles. But so long as the baseline remains low, it will allow the United States to bring in more revenue without having to raise taxes on household income or corporate profits. Trump has brought in $150 billion in tariff revenue since taking office, including an unexpected government surplus in June. To put that in perspective, at this pace, the country's expanded tariff revenue will be more than enough to cover the estimated cost of Trump's 'Golden Dome' missile defense shield. When Trump awarded Laffer the Medal of Freedom in 2019, he pointed out that the economist had proved that when tax rates are too high, 'the result is less growth and lower tax revenues,' while 'lower tax rates spur investment, economic growth, and raise government revenue.' That lesson applies to trade as well. Trump is right to raise the baseline U.S. tariff from near zero. But he should remember that the Laffer curve works both ways — and raising tariff rates too high will result in less growth and less revenue, not more.
Telegraph
02-06-2025
- Business
- Telegraph
Britain should ditch ‘distorting' stamp duty, says Reagan's economic tsar
Britain should ditch 'distorting' stamp duty charges that 'lock people in their homes', Arthur Laffer has urged. The economist behind the Laffer curve said property transaction taxes are such a big problem in the national tax system that the UK would be better off with an American-style annual property wealth tax. Mr Laffer, who has served as adviser to both former president Ronald Reagan and president Donald Trump, told The Telegraph that the UK would be better off if homeowners paid annual property taxes as they do in the US instead of stamp duty. He said: 'The [annual] property taxes in Britain are low, but the transaction tax is very high. The US is the reverse. We have property taxes everywhere, which is a wealth tax, and we don't have transaction taxes on houses. 'All property taxes do in Britain is lock people into their homes that they can't get out. It just distorts the whole tax system in Britain, it's just awful. 'It is one of the very biggest problems in Britain's tax system.' Mr Laffer is most famous for conceiving the Laffer Curve, an illustration of the concept that increasing tax rates can eventually lead to lower revenue because the higher taxes trigger so much behavioural change. Stamp duty is widely hated by economists and consumers alike because it makes it increasingly difficult to move home and makes the housing market inefficient – which in turn takes a toll on productivity. In America, by contrast, homeowners do not pay large taxes when they purchase their homes but instead pay an annual tax based on a percentage of their property's value. Mr Laffer said: 'Income tax is a problem in Britain, but these transaction taxes are big stuff too.' Stamp duty is taxed in bands that are not adjusted to account for house price growth, meaning homeowners get dragged into higher tax brackets as house prices rise. Since the tax bands were last adjusted in 2014, the average London house price has climbed by 30pc. Over the same time period, the stamp duty bill on the average home in the capital has surged by 54pc. The Office for Budget Responsibility (OBR) forecast in March that the Treasury's tax take from property transactions will nearly double from £15bn in 2024-25 to £26.5bn in 2029-30. Trump's tax cuts will 'save us from a disaster' Mr Laffer was an adviser to Donald Trump's 2016 campaign and says he has met with the US president several times since he took office earlier this year. He said he has told the Mr Trump that he should scrap US corporation tax on profits and replace it with a value added tax on sales. Although Mr Laffer is i n favour of Mr Trump's tax bill, he said the president should go further with measures to boost the economy. The biggest measure in the bill will be an extension to the tax cuts that Mr Trump introduced in 2017 and are due to expire this year. Mr Laffer said: 'I know they talk about it as being a tax cut. It's not. It's just making Trump's tax cuts permanent. 'If it were not passed, there would be a huge increase in taxes across the board, which would be very detrimental. The bill going through the Senate right now does not create something wonderful but it saves us from a disaster.' Mr Laffer said that America should establish a free trade agreement with the UK, and that Ireland should leave the EU to become part of the trading bloc too. 'You're gonna hate me for this, but I think it should be with Ireland too. I think they should get out of the EU and should become part of the sort of the US/ UK/Ireland group. I think that would be a terrific free trade group.'
Zawya
14-05-2025
- Business
- Zawya
'Tariff Laffer Curve' reins in trade agenda: Mike Dolan
LONDON - An irony about the ludicrously steep import tariffs U.S. President Donald Trump imposed on China last month is that they made no sense as taxes - at least if you believe one of the canons of Republican tax policy. The rapid reduction of those bilateral import levies in Geneva this weekend - after less than a month in place - may thus owe much to what some economists dub the 'Tariff Laffer Curve'. The controversial theory suggests government revenue from higher taxes peaks at a specific tax rate, above which damage to the incentive to work, economic activity and investment starts to depress the overall tax haul. The reverse was also true, it argued, and this was used to justify tax cuts even when budgets were tight. The idea, one of the key tenets of Ronald Reagan's economic adviser Arthur Laffer in the 1980s, was used to help justify the decade's rollback of tax and government in America and Britain. The theory's detractors claimed the revenue-boosting powers of tax cuts were never proven and merely acted as a smokescreen for 'trickle down' economics. But Laffer's curve and his ideas have remained popular with successive Republican administrations. Laffer himself, now aged 84, has been a Trump supporter and was awarded the Presidential Medal of Freedom by Trump in 2019. Assuming that tariffs, Trump's favored trade weapon, are in fact a tax and designed to be a revenue-raising function, then some economists argue the draconian 145% tariffs levelled at China far exceeded what any Laffer Curve would deem sensible. In other words, if 100%-plus U.S. tariffs on Chinese imports and vice versa started to act as a bilateral trade embargo, then the revenue-raising aspect of the levies would obviously be weakened. To some degree, that was acknowledged by U.S. Treasury Secretary Scott Bessent in Geneva on Monday when he said neither side wanted a trade embargo. And with China reporting a 21% drop in bilateral trade in April and cargo data from U.S. ports showing Chinese container activity plummeting another 35-40% last week, an embargo was, for all intents and purposes, starting to play out. TARIFF LAFFER To what extent revenue calculations will factor into the global tariff strategy moving forward remains to be seen, but they will likely play an important role in budget negotiations unfolding in Congress this month. And eventual bilateral trade deals being worked out bear watching in that regard. Benn Steil, director of economics at the Council on Foreign Relations, last month outlined three major problems with reliance on steep tariff hikes for government revenues. "The first major problem is that tariffs at these unprecedentedly high levels will likely push us beyond the apex of the tariff 'Laffer Curve' - the point at which tariffs bring in declining revenues owing to the steep fall in imports." Another reason, Steil argued, was that to boost government revenue via tariffs Americans needed to keep importing and not substituting for American-made goods - the other stated aim of the trade policy. The third reason was that the higher risk of recession would erode broader tax revenue by far more than tariffs could muster. Economists Simon Evenett and Marc-Andreas Muendler delved into the implications of the 'Tariff Laffer Curve' in a research paper published last month. When tariffs increase, they wrote, they discourage the taxed activity - trade. "The relevant empirical question is: at what import tax rate do tariff revenues max out?" The economists considered a range of cases where each dollar of import taxes collected reduces the trade deficit by anywhere between 25 and 90 cents. They concluded that even in an extreme case where U.S. savings only go up by 25 cents on the dollar of tariffs collected, the maximum gain in government revenue is under $500 billion - less than four weeks of federal spending. The total U.S. tax take last year was $4.92 trillion. Trump's plan to roll over expiring tax cuts passed during his first White House term would reduce revenues by about $5 trillion over 10 years, according to a congressional estimate. "Hiking import tariffs is not a viable solution to fund today's public finances," they concluded. That the gambit on extreme Chinese tariffs appears to have been cut short so quickly may speak to the thorny budget negotiations underway this month, negotiations on tax cuts that neither projected tariff revenues nor federal spending cuts appear to be justifying. If Trump truly needs import tariff revenues to square the circle, he will have to be more careful in setting them so as not to bite the hand that feeds. The opinions expressed here are those of the author, a columnist for Reuters (By Mike Dolan; Editing by Nia Williams)
Yahoo
28-03-2025
- Automotive
- Yahoo
Will tariffs juice the used car market?
CHICAGO (NewsNation) — While Noted economist Arthur Laffer warns that President Donald Trump's 25% tariffs on auto imports could add $4,711 to the cost of a vehicle, some in the used car industry tell NewsNation it could mean a spike in sales — but not likely before a spike in prices. Manny Gonzalez, owner of Manny Trucks in Chicago, said the market is similar to what was happening during the COVID-19 pandemic and supply chain issues. Gonzalez said that during that period, he had to raise prices by about $1,500 to $2,000. Trump tells automakers not to raise prices over tariff: Official He, however, cautioned customers not to panic. 'First people go a little bit crazy and they start to rush to buy a used car, and that boosts the price for used cars for us buying them,' he said. 'People, let's not be scared. Whatever goes up is going to come down; that always happens.' Trump maintains the 25% tariffs will cause more foreign and domestic automakers to expand production and open new factories in the U.S. On Monday, he celebrated a planned $5.8 billion investment by South Korean automaker Hyundai to build a steel plant in Louisiana as evidence that his strategy would succeed. How will Trump's auto tariffs affect car prices? Trump said the 25% auto tariffs would help to reduce the federal budget deficit while moving more production into the United States. 'For the most part, I think it's going to lead cars to be made in one location,' Trump told reporters on Wednesday. 'For right now, the car would be made here, sent to Canada, sent to Mexico, sent to all over the place. It's ridiculous.' Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
