April 18, 2012

Supply-side Silliness

By Don Kirk in Economics, Free Markets Myth

Noted supply-side economist Arthur Laffer argued in today’s ‘Investors’ Business Daily’ that the ‘Buffet Rule’ tax increase proposed upon the wealthy will drive prosperous Americans out of the country, just as higher taxes on the wealthy drove prosperous people out of California into other states. Supply side economics would have a better chance of earning a hearing from voters if the messengers were not so ideological.

There is no data whatsoever that Americans are fleeing the United States because of tax rates. And the data on California emigration do nothing to inspire confidence that the high tax rates in California are what is motivating people to flee the state. The immigration into California every year is nearly as great as the emigration. True, the annual net loss of population is now a reversal of a long-term trend of annual gains, but still, hundreds of thousands of people move to California every year for a host of personal reasons even as hundreds of thousands move out every year for their host of personal reasons. If higher taxes were the primary motivation to move out, then what is the primary motivation to move in; they have a DESIRE to pay higher taxes? Dr. Laffer’s argument makes no sense, especially without any hard data to back up his claim.

His argument is ideological, which is another way of saying, he is making a myth. This is simply another example of the ‘free market myth,’ where so many highly intelligent people substitute the emotional appeal of ideological myth for the more difficult work of impartial reasoning. It’s amazing how much of economics is dominated by myth-makers on the political Left and Right.