Tag Archives: Art Laffer

The Impact Of The Biden Administration On The Poor

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The Biden administration was economically rough for most Americans. Inflation skyrocketed, wages did not keep up, and jobs growth (after the real numbers came out) was slow. On October 3rd, Issues & Insights posted an article providing some concrete information about the impact of the Biden administration.

The article reports:

Even before he was president, Biden was fond of demanding that the rich pay their “fair share,” which makes a snappy sound bite but leaves open exactly what a “fair share” is and who gets to decide what rates are “fair.”

Fortunately, Biden never got his billionaire tax.

But he did succeed in making life more difficult for the poor. Both the overall and child poverty rates swelled while he was in office. The overall poverty rate grew by 40.2% from 2020 to 2024. The child poverty rate spiked by 38.1% over that same period.

“If you choose 2019 as your point of comparison, the increase in poverty under Biden is bad. If you choose 2020, it’s catastrophic,” says Jacobin magazine, which considers itself “a leading voice of the American left” that offers a “socialist perspective.”

As it happens, 2019 was the year Biden told “rich donors at a ritzy New York fundraiser” that poverty was “the one thing that can bring this country down.” Salon said he “listed several new programs to help the poor that he would fund if elected.”

“We have all the money we need to do it,” he said.

This is typical of Democrats. They have promised for the better part of a century that they will pull the poor out of poverty if they can just get their hands on more of other people’s money. Yet it never works that way. Biden and others can whine that poverty soared during his miserable presidency because they couldn’t raise taxes on the wealthy, but soaking the rich does nothing for the poor but hurt them.

Our history clearly shows that when tax rates are cut, economic growth follows, and everyone, yes, even the poor, benefits. Economist Art Laffer, who drew that famous curve that “showed the relationship between tax rates and tax revenues” and helped shape Ronald Reagan’s growth-boosting economic policies, has made a career of explaining why this is.

He has argued, quite accurately, that the economy underperforms when the highest marginal income tax rates are raised, and that the opposite occurs – the economy overperforms – when the highest marginal income tax rates are cut. He has further said that redistributing dollars to those with lower incomes from those who are more well off diminishes both parties’ incentives to work.

People are more inclined to work hard when they get to keep what they earn. It is demoralizing (to say the least) for a worker who works overtime to support his family to have to send 30 or 40 percent of his earnings to the state and federal government.

The Laffer Curve Also Applies To Cigarette Taxes

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Investor’s Business Daily posted an article today about the increased cigarette taxes in New York State.

The article reports:

The state of New York thought it would reap a bonanza after increasing taxes on cigarettes. But there was no bonanza. In fact, the tax take actually fell. New Yorkers, may we introduce Art Laffer?

Art Laffer is the creator of the Laffer Curve, seen below:

LafferCurveThe Laffer Curve illustrates the relationship between tax rates and revenue, showing that increasing tax rates will only increase revenue up to a point.

The article further reports:

The New York Post cites a National Academies of Sciences, Engineering and Medicine report that says the state’s losses are much bigger — some $1.3 billion in taxes aren’t collected each year, due to behavioral changes.

Of course, some of that loss might be considered favorable in that it represents people who simply quit rather than pay the higher levy. Indeed, estimates say that 19% of those who smoked have quit in the last decade.

Taxable sales, however, are down 54% in the same period. If the goal of the higher tax was just to get some smokers to quit, then mission accomplished. But if the goal was twofold — get smokers to quit and raise revenue — then it has failed.

But for many others who still smoke, the behavioral changes haven’t been as favorable. Some just pay up. But others simply buy black-market cigarettes, supplied mostly by organized crime. The Tax Foundation estimates that 58% of cigarettes in New York come from out of state. So roughly 6 in 10 cigarettes now are not taxed by New York.

The article also points out that the year after the tax increase imposed, a household earning less than $30,000 a year spent 23.6% on cigarettes, as opposed to 11.6% in 2004. A family earning over $60,000 a year, spent 2.2% on cigarettes. Seems a little uneven to me.

The article concludes:

So is it any surprise that the tax take is shrinking? No. This was in fact entirely foreseeable. But, of course, foreseeing it would have required New York voters and the politicians they put into office to actually learn something about economics.

Agreed.