Article – Cut taxes to save economy: Reagan adviser

17 March 2015
Belinda Merhab
Perth Now

AN American economist who’s advised world leaders like Margaret Thatcher and Ronald Reagan says the key to reviving Australia’s ailing economy is lower taxes.

ARTHUR Laffer says scrapping all taxes and replacing them with just two – a 12 per cent GST and a 12 per cent income tax for all – would boost economic growth and government revenue while lowering unemployment.
He suspects Australia’s tax issues are similar to those of the US: a mess of taxes with different agendas that add up to a “cacophony of garbage”.
“If you gave me a long weekend, political support and a large magnifying glass, I could send the economy into orbit,” Dr Laffer told AAP in Sydney on Tuesday.
According to his renowned Laffer Curve, tax hikes work as disincentives and actually lead to reduced tax revenues, while lower taxes will have the opposite effect.
Lower taxes give people more incentive to work, and less incentive to evade taxes.
“If you feed a dog, you know exactly where the dog is going to be – it’s going to be right where you put the food down,” Dr Laffer said.”If, on the other hand, you beat a dog, you know where the dog won’t be, but you have no idea where the dog will be.”
Dr Laffer famously drew the Laffer Curve on a napkin in 1974, during a dinner with Donald Rumsfeld and Dick Cheney, who were then aids to US President Gerald Ford.
The model influenced the economic policies of the Reagan administration, marked by cuts to taxes and public spending.
Dr Laffer is being hosted in Australia this week by the Australian Chamber of Commerce and Industry, ahead of the federal government’s upcoming tax white paper.
He says all taxes are bad, so government should collect its revenue in the least damaging fashion, and spend those resources in the most beneficial way.
He said giving valuable resources away like free education or medical care (like Obamacare in the US, or Australia’s Medicare), was a recipe for government bankruptcy.
“The toothfairy no longer works at the Treasury,” Dr Laffer said. “It’s like putting me in a smorgasbord – I’m going to way over-eat and go right to the caviar until I throw up.”
If you tax people who work, and you pay people who don’t… don’t be surprised if you find a lot of people not working.”
Courtesy of Perth Now