Latest news with #Laffer
Politico
6 days ago
- Business
- Politico
Where are Trump tariffs on the Laffer Curve? Ask Arthur Laffer
Presented by Editor's note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day's biggest stories. Act on the news with POLITICO Pro. Quick Fix President Donald Trump has described Arthur Laffer's back-of-the-napkin theory that lower income taxes can boost revenue as the stuff of legend. But right now, the progenitor of the Laffer Curve and longtime Trump confidant doesn't see much evidence supporting the administration's claims that the aggressive tariff regime is poised to fill the government's coffers and reignite the economy. Tariff-related revenue has rocketed since customs began collecting on the new duties Trump has imposed on imports. The president has framed the taxes as a massive windfall that could unleash a 'BONANZA FOR AMERICA!!!' if paired with income tax cuts. Laffer told POLITICO that the net effects are probably 'rather minuscule either way.' 'By raising tariffs, of course, you do collect more money per unit of import — that's true,' said Laffer, who advised Trump during the campaign and continues to be a strong backer of the president's agenda. 'But it's also true that you cause weakness in the economy and you lose revenues elsewhere in the system. The net effect is probably not very large either way.' Laffer has long been skeptical of Trump's approach to tariffs. But his points about the negligible effects of the administration's ever-changing trade policies are notable given the president's public support for Laffer's most famous theory. What's more, many economists believe that the Laffer Curve — which describes the relationship between rates and revenue as a bell curve where higher taxes lead to diminishing collections — can be an important tool for assessing the effects of Trump's tariff agenda. James Pethokoukis, a senior fellow at the conservative-leaning American Enterprise Institute, put it this way in a recent blog post: '[The Laffer Curve] suggests unavoidable and unpleasant trade-offs for Trumponomics supporters: The Trump administration wants tariffs to both reduce the trade deficit and increase revenue—goals that fundamentally conflict.' Laffer said an across-the-board tariff could be a 'nice revenue raiser' so long as it wasn't opened up to exemptions, credits or other deductions. And even then, it would only yield an economic benefit if the revenue was used to reduce other forms of taxation that are 'more deleterious' to the overall economy, he said. Nevertheless, 'it's not as good as an income tax as far as collecting revenue goes,' Laffer said. Trump, along with Treasury Secretary Scott Bessent, has listed income tax relief among the many goals of the trade regime. Unsurprisingly, Laffer sees a lot of upside in the tax cuts included in Trump's 'big, beautiful bill' — particularly with regard to the elimination of taxes on tipped income, as well as a new deduction for auto loan payments — and said it would be 'very bad for the economy' if Congress fails to pass the measure. But 'there is no doubt in my mind that trade protectionism will hurt the economy a lot,' he added. 'The question is: What will Trump's actions do?' Laffer said. 'My guess is they'll make for freer trade, not for more protectionism. I think he really wants [other countries] to come to the table and reduce their tariffs on us, and that would be wonderful, and we should have those tariffs lowered.' 'Will he actually do that? I don't know.' IT'S TUESDAY — As always, send your tips, suggestions and personnel moves to Sam at ssutton@ Driving The Day Senate Finance votes on Bill Long's nomination to serve as IRS commissioner at 9:30 a.m. The committee holds a nominations hearing on picks including Brian Morrissey Jr. to be general counsel at Treasury at 10:30 a.m. … The U.S. Chamber of Commerce kicks off its Capital Markets Summit at 9:35 a.m., with speakers including Acting Comptroller of the Currency Rodney Hood, NASDAQ President Nelson Griggs, SEC Commissioner Mark Uyeda, acting FDIC Chair Travis Hill, Sen. Mike Rounds, Rep. Bill Foster, House Financial Services Chair French Hill and Deputy Treasury Secretary Michael Faulkender. The Brookings Institution holds a discussion on the earned income tax credit at 10 a.m. … The Council on Foreign Relations holds a discussion on the U.S. economic outlook and monetary policy at 1 p.m. … Hill speaks at a stablecoin event hosted by the Atlantic Council and WilmerHale at 1 p.m. … SEC Chair Paul Atkins testifies before Senate Appropriations at 2:30 p.m. … Sort of the opposite of 'go woke, go broke' — White-shoe law firms that cut deals with the Trump administration to avoid punishing executive orders are losing Wall Street clients to institutions that challenged the president's directives, the WSJ's Erin Mulvaney, Emily Glazer, C. Ryan Barber and Josh Dawsey report. Fantastic news for lazy 'Game of Thrones' headlines —JPMorgan Chase CEO Jamie Dimon said he's still 'several years away' from retirement, during an appearance on Fox Business on Monday. Trouble in Treasuries — With tariffs hanging over the economy, analysts say longer-dated Treasury securities may continue their slump ahead of Friday's jobs report, per Bloomberg's James Hirai and Michael Mackenzie. The Economy It's not the policy, it's the uncertainty — Federal Reserve Bank of Chicago President Austan Goolsbee said the economy's solid fundamentals would allow the central bank to proceed with rate cuts, per Bloomberg's Catarina Saraiva. But that will depend on greater certainty around trade policy. Deeper — The manufacturing sector continued to contract in May as tariffs and other policy risks dented new orders and hiring, according to the Institute for Supply Management's closely watched monthly index. The expiration of the boom — South Florida's real estate market exploded during the pandemic. But a slowdown in migration to the region, coupled with higher interest rates and mortgage costs, has led to a dropoff in home sales, Bloomberg's Anna Kaiser reports. New poll — A new Pinpoint Policy Institute poll conducted by Trump's campaign pollsters Fabrizio Ward found that the president's approval rating was slightly underwater at 46 percent to 49 percent. While Trump still maintains a 45 percent-39 percent edge over congressional Democrats on economic policy, a whopping 78 percent of those surveyed said they are worried about the cost of everyday goods. Furthermore, 69 percent said they are worried about their tax burden and 63 percent sait they are worried about retirement savings or investments. The survey of 800 registered voters was conducted from May 15-19. At the regulators Watch this space — Katy O'Donnell reports that the Trump administration has placed two officials at the Federal Housing Finance Agency on leave. The shakeup sidelined Anne Marie Pippin, senior associate director and former deputy director of the Division of Conservatorship Oversight and Readiness, as well as Maria Fernandez, senior associate director of the Office of Housing and Regulatory Policy. Shake up at the statistical agencies — As Trump floats moving the Bureau of Labor Statistics under Commerce, Nancy Potok, the former chief statistician at the Office of Management and Budget, along with former BLS chief Erica Groshen have an op-ed in Science on how 'the administration's appetite for disruption [might] be harnessed to modernize federal statistics.' Jobs report Former Assistant Secretary of the Treasury for Economic Policy Eric Van Nostrand has joined Lazard Asset Management as its global head of markets and chief economist. Van Nostrand, a top adviser to former Treasury Secretary Janet Yellen, was previously a portfolio manager and managing director at BlackRock. Natalia Díez Riggin, a former top staffer to Senate Banking Chair Tim Scott and Sen. John Kennedy, has been named the SEC's director of legislative and intergovernmental affairs. She's been serving in the role in an acting capacity since January. — Declan Harty
Yahoo
02-06-2025
- Business
- Yahoo
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. 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 in 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. He said: 'One thing I really hope Trump does with Britain is really bring into a free trade relationship with the US. '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.' Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Yahoo
26-04-2025
- Business
- Yahoo
Reagan-era economist scared by tariffs but open to 'great negotiator' Trump making them work
Legendary economist Art Laffer admitted on Wednesday he's terrified of President Donald Trump's tariffs, though he said he's hopeful that Trump will reduce them once he secures some trade deals. In an interview with Axios, Laffer said that Trump's protectionist policies have ushered in the "most scary, in-flux" economic moment he's ever seen. "I don't know how anyone looking at the facts could argue that protectionism doesn't create downturns," he told the outlet, adding, "The more protectionism there is, the greater the downturn. Reducing tariffs and protectionism causes a boom in the economy." Longtime Trump Foe Letitia James Reviewing Possible Insider Trading Over President's Tariff Pause Despite the criticism, the Reagan-era economist has been a fan of Trump over the years. He referred to him as "a great negotiator" as well as the "single best president of his lifetime." Trump awarded Laffer with the Presidential Medal of Freedom in 2019 for his economic theory – dubbed the "Laffer curve" – that shaped President Ronald Reagan's tax cuts as well as those implemented in Trump's first term. Read On The Fox News App While generally supportive of Trump, the economist has been sounding the alarm over the reciprocal tariffs the president placed on imports from multiple countries earlier this month, before the administration announced a 90-day pause. Gop Lawmaker Touts $19M Trump Tariff Success Story In Her District: 'New Model For American Manufacturing' "Once you screw around with supply chains, production facilities, all of that, it's very hard to reverse that," Laffer told Axios. He also referred to the tariffs as a "perverse government response" that "is a sure-fire way of causing an economic bust." Still, Laffer expressed hope that Trump could make the policy work, as long as he makes good deals and reduces tariffs immediately after. "You will find out with whether I'm right to be scared or right to be hopeful probably in 90 days — there's not a lot of time," he said, referencing Trump's pause on all tariffs except for those affecting China. Click Here For More Coverage Of Media And Culture In an interview with Fox News Channel earlier this month over the 90-day pause, Laffer seemed to express a more optimistic view of how Trump was leveraging tariffs. "It's Trump at his very best, Martha," he said. "You know, I was hoping, and I believed, that he was going to be able to do this – although I always have trepidations 'cause I'm a wuss. I'm afraid." Laffer continued, "But he, boy, he knows how to do these negotiations and he's going to eliminate a very serious problem of all these foreign tariffs, and non-tariff barriers and quotas against us, and we are the freest trade country. And now he's going to bring 'em back in and really bring down their barriers to trade. And we're going to have a much freer trade world."Original article source: Reagan-era economist scared by tariffs but open to 'great negotiator' Trump making them work
Fox News
26-04-2025
- Business
- Fox News
Reagan-era economist scared by tariffs but open to 'great negotiator' Trump making them work
Legendary economist Art Laffer admitted on Wednesday he's terrified of President Donald Trump's tariffs, though he said he's hopeful that Trump will reduce them once he secures some trade deals. In an interview with Axios, Laffer said that Trump's protectionist policies have ushered in the "most scary, in-flux" economic moment he's ever seen. "I don't know how anyone looking at the facts could argue that protectionism doesn't create downturns," he told the outlet, adding, "The more protectionism there is, the greater the downturn. Reducing tariffs and protectionism causes a boom in the economy." Despite the criticism, the Reagan-era economist has been a fan of Trump over the years. He referred to him as "a great negotiator" as well as the "single best president of his lifetime." Trump awarded Laffer with the Presidential Medal of Freedom in 2019 for his economic theory – dubbed the "Laffer curve" – that shaped President Ronald Reagan's tax cuts as well as those implemented in Trump's first term. While generally supportive of Trump, the economist has been sounding the alarm over the reciprocal tariffs the president placed on imports from multiple countries earlier this month, before the administration announced a 90-day pause. "Once you screw around with supply chains, production facilities, all of that, it's very hard to reverse that," Laffer told Axios. He also referred to the tariffs as a "perverse government response" that "is a sure-fire way of causing an economic bust." Still, Laffer expressed hope that Trump could make the policy work, as long as he makes good deals and reduces tariffs immediately after. "You will find out with whether I'm right to be scared or right to be hopeful probably in 90 days — there's not a lot of time," he said, referencing Trump's pause on all tariffs except for those affecting China. In an interview with Fox News Channel earlier this month over the 90-day pause, Laffer seemed to express a more optimistic view of how Trump was leveraging tariffs. "It's Trump at his very best, Martha," he said. "You know, I was hoping, and I believed, that he was going to be able to do this – although I always have trepidations 'cause I'm a wuss. I'm afraid." Laffer continued, "But he, boy, he knows how to do these negotiations and he's going to eliminate a very serious problem of all these foreign tariffs, and non-tariff barriers and quotas against us, and we are the freest trade country. And now he's going to bring 'em back in and really bring down their barriers to trade. And we're going to have a much freer trade world."
The Hill
24-04-2025
- Business
- The Hill
Laffer: Tariffs could wreak havoc on economy
Art Laffer, a noted conservative economist, said in a new interview that President Trump's tariffs could cause a significant downturn in the economy. 'I don't know how anyone looking at the facts could argue that protectionism doesn't create downturns,' Laffer said in an interview with Axios on Wednesday. 'The more protectionism there is, the greater the downturn. Reducing tariffs and protectionism causes a boom in the economy,' Laffer added. Laffer — whom Trump awarded the Presidential Medal of Freedom for his contributions to economics in 2019 — said he was optimistic that Trump would secure trade deals and eventually reduce tariffs. He called the president a 'great negotiator' and said he was the 'single best president' of his lifetime, according to Axios. But Laffer said he is concerned about the potential economic damage that could occur in the meantime. 'You will find out whether I'm right to be scared or right to be hopeful probably in 90 days — there's not a lot of time,' Laffer said in the Axios interview. 'Once you screw around with supply chains, production facilities, all of that, it's very hard to reverse that,' he added. 'What you got here is something that is very time sensitive.' Trump announced a series of new tariffs since taking office, including a 10 percent baseline tariff, with higher 'reciprocal' tariffs on many U.S. trading partners. Two weeks ago, he announced a 90-day pause on the higher tariffs for most countries, to allow time for countries to negotiate trade deals with the U.S. Trump left China's tariffs in place and subsequently increased them to 145 percent, sparking concerns about a trade war between the two largest economies in the world. In recent days, Trump has shifted his tone on China, saying the 145 percent duty is 'very high' and suggesting he's optimistic about a deal with China.
