Arthur Laffer brings conservative advice to Ukraine
Conservative economist Arthur Laffer rocketed to fame in the 1980s, advising U.S. President Ronald Reagan and United Kingdom Prime Minister Margaret Thatcher on tax policies.
Today Laffer is offering his views to Ukraine’s Finance Minister Natalie Jaresko.
His Laffer Curve invention – a slope that shows how the government could actually save by cutting its higher tax rates – was what ultimately brought Laffer fame in the world of economics.
Laffer is the founder and chairman of Laffer Associates, an investment research and consulting firm, and advises Republican presidential candidates.
“The pomp, and pageantry, and the big pictures and the great dinners… that’s not where Ukraine is going to get its answers,” Laffer told the Kyiv Post in a Skype interview from his office in Nashville, Tennessee.
Whether it is the U.S., Great Britain or Ukraine, Laffer looks at five areas when he analyzes countries: taxes, government spending, monetary policy, trade policy and regulations.
In all of these sectors, Ukraine is weak compared to its Western neighbors, he said.
“What one wants to do is collect taxes in a way that does the least damage to the economy,” Laffer, 75, said. “We tax people who speed on highways to get them to stop speeding. We tax cigarettes to stop people from smoking. Why on earth do we tax people who earn income and businesses that employ people or entrepreneurs that invest?”
Post-soviet economies have generally performed poorly, with population declines serving as unhealthy indicators.
Ukraine is ranked second among countries with the highest death rates by the U.S. Central Intelligence Agency World Factbook.
Ukraine’s output production is also very low relative to other European countries. Ukraine’s $3,083 gross domestic product per capita in 2014 was about one-eighth of the average European one, Laffer said.
How the tax system works can bring prosperity or further plundering, he said.
That's why he favors going back to the basics of “having the lowest possible tax rate on the broadest possible tax base” as the best route to people declaring their incomes and paying their taxes.