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Art Laffer Endorses 9-9-9

12:34 PM, Oct 19, 2011 • By JEFFREY H. ANDERSON
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In today’s Wall Street Journal, Arthur Laffer provides a high-profile endorsement of Herman Cain’s 9-9-9 tax plan. Laffer writes, “Mr. Cain's 9-9-9 plan was designed to be what economists call ‘static revenue neutral,’ which means that if people didn’t change what they do under his plan, total tax revenues would be the same as they are under our current tax code. I believe his plan would indeed be static revenue neutral, and with the boost it would give to economic growth it would bring in even more revenue than expected.”

Herman Cain

Discussing a (very) rarely mentioned aspect of Cain’s plan — one that Cain would do well to start emphasizing — Laffer writes that “the plan exempts from any tax people below the poverty line.” That certainly helps combat the charge that the plan is regressive. Laffer elaborates, writing that the “9-9-9 plan has made certain that even on static terms those below the poverty line will be better off — period.”

Laffer states, “The whole purpose of a flat tax, à la 9-9-9, is to lower marginal tax rates and simplify the tax code. With lower marginal tax rates (and boy will marginal tax rates be lower with the 9-9-9 plan), both the demand for and the supply of labor and capital will increase. Output will soar, as will jobs. Tax revenues will also increase enormously — not because tax rates have increased, but because marginal tax rates have decreased.”

He observes that “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.”  Laffer’s response?  “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.”

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