Economist Art Laffer’s Advice: Cut Taxes — Not Special Deals — To Keep Jobs In U.S.

President-elect Donald Trump says companies thinking about moving overseas should instead negotiate special deals across state lines.

One Nashville economist says that might be a good idea for those companies, but maybe not for the states themselves.

Conservative economist Art Laffer says he’s fine with companies asking for special tax breaks, but he doesn’t think states should actually agree to give them out.

“I think favors to specific companies carry with it a lot of risks,” he said in an interview this week. “[There are] a lot of moral risks as well, when you’re giving out money to friends — I mean, it’s just not a smart thing for government to leave a big pot of money there for politicians to distribute to their friends.”

Laffer has advised governments for decades. Back in the early 1980s, he helped President Ronald Reagan come up with his tax cut plan.

Laffer has long argued high taxes can hurt economic growth and lower government revenues. That idea is often presented as an economic theory that bears his name: the ”
Laffer Curve.”

So his advice to states is that they compete to keep taxes low for all companies — rather than singling out individual employers or industries.

And by that measure, Laffer gives Tennessee pretty good scores already. The state constitution bars lawmakers from imposing a general income tax, and it’s on the way toward phasing out its tax on investment income, known as the Hall tax. On Laffer’s advice, Tennessee has also slashed taxes on gifts and estates.

He argues that the investments Tennessee attracts with those moves should be enough to entice companies, without extra perks.