Two things happened today in which a couple of high-profile conservatives inadvertently told the truth about their policies.
One of them was the admission by Gov. Rick Perry that creationism is taught in Texas public schools, side-by-side with evolution. But there was a far more important slip, which I'll get to in a moment.
As for Perry, I'll leave it for others to vet this subject more. Just let it be said that teaching creationism is illegal, as TPM points out here. Another thing to keep in mind is that creationism is supposed to be passe' now and the acceptable language now is supposed to be "intelligent design."
Intelligent design theory supposedly keeps God out of the equation, by in affect saying we don't know who that danged intelligent designer was. It could have been God (wink, wink), but it might be some civilization of three-headed aliens that designed us.
Perry, however, let the truth slip out and didn't try to say that Texas teaches some agnostic form of intelligent design, but in fact teaches creationism.
But now onto the bigger slip of the lip.
Arthur Laffer, the intelligent designer behind the Laffer Curve, was talking to CNBC about tax rates and Warren Buffet and how increasing tax rates on the rich will not increase government revenues. Why?
"You raise tax rates on the rich, all the evidence suggests they pay less in taxes, because they can get lawyers, accountants, deferred-income specialists. They can change the location of their income, the timing of their income, the composition, and the location. They just leave."
Uh-oh. I think we just saw a lip slip. When the Laffer Curve was first presented to us back in the Reagan days, it was all about "incentive." As the
Laffer Center explains it
"The economic effect recognizes the positive impact that lower tax rates have on work, output, and employment, which provide incentives to increase these activities. By contrast, raising tax rates penalizes people for engaging in these activities."
We were told back then that if people weren't allowed to keep more of their money, they wouldn't have any incentive to earn more. Even a middle-class working person might eschew overtime because they wouldn't find their after-tax earnings worth the extra effort (I always found that part a little specious since people who are trying hard to make ends meet are always happy for a chance for some additional income, even if it's taxed at a slightly higher rate).
But now we find that it's not really about incentives, it's about the ability of upper-class folks to find ways of not paying taxes. It's not that they lose the incentive to earn more money and therefore don't earn more. Nope, what Laffer is saying is that they continue their economic activity, but find ways to avoid paying taxes on it.
So the whole argument that we've heard from the right since the Reagan years that higher taxes are a disincentive to earning more money turns out to be BS (surprise!).
If I read Laffer correctly, people continue to earn more money, but they find ways to shield it from taxes, ways that lower-strata earners haven't figured out or can't afford to employ or don't have access to.
That's quite different from argument that people stop earning more money because of the tax disincentive.
In fact, one could even argue that higher tax rates increase economic activity if it sends high-income people scurrying for "lawyers, accountants, deferred-income specialists." It creates work for them, and they have staffs of administrative assistants, clerks etc., who also benefit from the increased workload. They earn more money, hire more people, spend more money in the community (or deposit it in banks or other investments).
Higher tax rates as a stimulus? Who knew?
Of course, Laffer's comments are a good argument for reforming the tax code and reducing or eliminating ways in which taxpayers can shield income.
But the fact of the matter is that in it its base assumptions, Laffer's ideas are unconvincing. Look at this scenario: Let's say someone makes $500,000 and tax rates are increased in a way that affects folks making $500,000 and up. Laffer says those folks are going to find ways to shield their income.
But aren't they going to be shielding their income anyway, whether they earn $500K, $400K, $300K?
I haven't vetted this site, but let's say it's correct about tax rates. According to this site, if you earn more than $380,500, your tax rate is 39.6 %.
The next rate below that is 36 % (for folks earning between $194,150 and $380,500).
Why would the people in the 36% bracket not use the same strategies we expect people in the 39.6% bracket to use. Because people in the 36% bracket face a tax rate that's 3 percent lower, we don't expect them to shield their income as well?
If the essence of capitalism is that we seek to maximize our own self-interests, isn't it likely that someone in the 36 percent bracket is going to be just as aggressive as someone in the 39.6% bracket in trying to minimize taxes?
Isn't it safe to assume that even now, with the ridiculous Bush-era tax rates, people are employing strategies to avoid paying taxes? To say that increasing tax rates will make people employ those strategies more is ridiculous. Isn't it pretty safe to assume that people are employing those strategies as aggressively as they can even now (see General Electric).
It almost sounds like Laffer is saying there is a point at which people are willing to pay taxes and will stop trying to shield income from them. If he believes that, then he hasn't taken a good look at today's Republican Party.