In his Wall Street Journal op-ed Monday, famed supply-sider Arthur Laffer argues that higher taxes on the wealthy rarely work because the wealthy simply shift their income. Edward S. Lampert, in 2004.President Obama’s upcoming tax increases, he says, are encouraging the wealthy to take cash and income off the table this year, robbing from next year’s growth and spending. As a result, he says “The economy will collapse in 2011.”Many argue with Mr. Laffer’s account of history and his premise. Still, there is evidence to support his argument that the wealthy are front-loading their income in 2010 in anticipation of higher rates next year.Take Eddie Lampert. According to a Bloomberg article, the billionaire’s hedge fund has just distributed to him about $829 million of stock in Sears Holdings, AutoNation and AutoZone.Whatever his motivation, by taking the stock now he would be taxed at the current capital gains rate of 15%. Under proposed legislation in Congress, any gains from the same move next year would fall under a new, higher ordinary-income tax rate of 39.6%.
By Robert Frank, June 8, 2010 WSJ

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