There should be no need to keep proving economist Arthur Laffer was right about increasing rates of taxation tending to produce proportionally less revenue while tax cuts can increase revenue collections.
It’s the long way of saying “People aren’t stupid.”
But Liberals have resolutely dismissed “The Laffer Curve” ever since he drew it to illustrate the principle for Dick Cheney and Donald Rumsfeld, then of the Ford Administration, back in 1974.
So repeated demonstrations of its validity are needed, and a lovely one appeared last week, courtesy of Conservative governance in Wisconsin and Liberal governance within 90 seconds’ driving distance, in Minnesota.
Taking office with a leftover Democrat deficit exceeding $3 billion in 2011, the Walker administration and legislative Republicans have cut taxes four times since. Counterintuitive? Maybe not: Thursday brought word that the June 30, 2015 closing balance for the state’s two-year budget is projected to be $1.04 billion, $912 million more than previous estimates.
Within two, two-year budgets, Walker’s tax cuts and collective bargaining reforms have helped swing state finances roughly $4.5 billion to the good.
Minnesota Democrats controlling their legislature and governor’s office responded to a smaller deficit last session with $2 billion in tax increases. They now expect a surplus of $825 million but without yet knowing the impact of a likely damaging tax increase targeting high-income earners.
Meanwhile, a new warehousing tax is implicated in a major Minnesota cheese producer deciding to store its products across the river, and Amazon says it will build a second big distribution center in Wisconsin, not Minnesota.
Wisconsin’s Legislative Fiscal Bureau, as spin-free as a government entity gets, said Thursday its early 2013 forecast projected slower economic growth primarily due to federal tax increases. Obviously there’s some wisdom in that slogan advising that we “act locally.”