Beware of columnists, politicians
To the Journal editor:
What prompts this letter are two versions of the same coin; one, an opinion by syndicated columnist Mark Shields in The Mining Journal and one by Alexandria Ocasio-Cortez on cable TV.
Mr. Shields on an exploding deficit due to the Republican tax cut and Ms. Cortez on raising money to pay for her free stuff by raising taxes. One believes if the deficit is X in 10 years it will be 10X. The other believes that if one can raise X from a tax increase one can raise 10X in 10 years.
Both 10-year plans will be dead before the first year is out. The economy is a dynamic beast not a static one.
One of the most important economic points was made by economist Art Laffer in producing the Laffer Curve. It shows that 9 percent tax rates and 100 percent tax rates will produce $0 revenues; the latter because no one will work.
Thus the optimum tax rate is somewhere between these two numbers. Surprisingly this optimum tax rate is relatively well known. It is about 17-18 percent of GDP. The consequence is any raise much beyond this number will reduce revenues. Furthermore, if tax rates are much above this number, a tax rate cut will increase revenues.
Not only are too many people not aware of this concept, but are astonished it is that low, even if they find it somewhat believable. Contrast this number by some calling for tax rates of 70 percent or more on certain groups.
When you hear some politician or opinion columnist say: the only alternative is to raise taxes; they have probably passed the point of no return. A tax increase will probably only make the problem worse, but it will look good on paper.