A former economic adviser to President Ronald Reagan thinks that the Biden administration is mistaken in its belief that beefing up the Internal Revenue Service with 87,000 additional agents will lead to greater tax collection from the richest Americans.
“They’ve got lots of lawyers, they’ve got lots of accountants, they’ve got a lot of different income specialists,” Art Laffer, the economist who served as a member of the Economic Policy Advisory Board during the Reagan administration, said of the nation’s wealthiest citizens.
“They have a lot of favorite grabbers. They have a lot of lobbyists, they have a lot of influence,” Laffer told Just The News.
“They know the tax codes inside out and have all this stuff done. I don’t care how many IRS people you go after them, you’re not going to get much more money from them.”
President Biden is expected to sign into law the Inflation Reduction Act on Tuesday afternoon.
Biden and Democratic lawmakers say that the bill will raise $737 billion in revenue by levying a 15% corporate minimum tax as well as a 1% tax on stock buybacks. The money is earmarked to fund climate initiatives as well as reductions in the cost of prescription drugs.
But Laffer thinks it will be the middle class that will bear the brunt of the prescribed tax hikes.
“If you raise tax rates, what you find is that average tax revenues from the top 1% go down, not up,” he said.
“And that’s because they use all of these loopholes and all these tax shelters.”
The Congressional Budget Office appears to agree with Laffer.
The nonpartisan CBO released an analysis which estimated that those earning less than $400,000 — the tax bracket that Biden vowed would not be penalized — would pay an estimated $20 billion more in taxes over the next decade as a result of the legislation.
The Democrat-led Senate rejected an amendment to the bill proposed by Sen. Mike Crapo (R-Idaho) which sought to exempt taxpayers earning under $400,000 from increased IRS scrutiny.
Democrats also claim that the bill will reduce the deficit and lower inflation, but Laffer thinks that higher consumer prices are here to stay for the foreseeable future.
“There is no chance from here to Sunday, frankly, in my view of the world, that we aren’t going to see inflation pop up to above 10% percent by the time we get into the [midterm] election [this coming November],” he told a conservative student gathering last month.
Inflation soared by 8.5% in July — slightly down from the 9.1% in June. The rate at which consumer prices are rising hasn’t been this high in four decades.
The Biden administration was criticized for its “Orwellian” claim that July saw “0% inflation,” but Laffer thinks there is truth to that statement.
“The president, as you know, said, last month’s inflation — July just by itself with 0%, which is true,” Laffer said.
“It is true. Oil prices came down dramatically, and were enough to offset the increase in other prices,” he said.
Laffer added: “But what he didn’t tell you is the month before last — June’s number — the number before July was 17+%.”
“So that’s why we look at year over year is because you get these volatility, these bibble-bobbles up and down on specific months,” Laffer continued.
“But if you look at it over the full year — this last survey, July’s was 8.5%, while the previous month was 9.1%.”
“But that’s still an extraordinarily high number.”