While many conservatives have called for tax cuts aimed at benefiting corporations and multimillionaires, economist Arthur Laffer — a former member of President Reagan’s Economic Policy Advisory Board — went a step further today. Writing in the Wall Street Journal, Laffer argued that the best way to stimulate the economy is to have “no federal taxes at all.” Here is what Laffer proposed to eliminate:
No income tax, no corporate profits tax, no capital gains tax, no estate tax, no payroll tax (FICA) either employee or employer, no Medicare or Medicaid taxes, no federal excise taxes, no tariffs, no federal taxes at all, which would have reduced federal revenues by $2.4 trillion annually. Can you imagine where employment would be today? How does a 2.5% unemployment rate sound?
For over a month, Republican-led filibusters have successfully blocked unemployment benefits legislation because it would add $33 billion to the deficit. Laffer’s $2.4 trillion revenue cut would increase the deficit by nearly 100 times that amount. After Laffer suspends all federal taxes, only $1.2 trillion would remain, the equivalent of what would be needed to pay for Social Security and Medicare. But because Laffer is eliminating the FICA tax, Social Security and Medicare would be cut. Funds would be greatly restricted for anything else, from national defense to veterans’ benefits to crime-fighting and prevention. But not to worry, says Laffer, defunding the government would magically cause unemployment to plummet to 2.5 percent.