When you’re in a hole, stop digging

If you don’t believe high state taxes can tackle the economy and bring it down, you haven’t been exposed to the real cause of the Great Depression of the 1930s.

While there were several factors that contributed to those dark economic days, Arthur Laffer reminds in his excellent commentary in today’s Wall Street Journal that high trade tariffs and government taxes formed the core of the financial crisis.

Laffer, a member of President Ronald Reagan’s Economic Policy Advisory Board and one of the nation’s top economists, shows how the share of the nation’s GDP (the most important economic indicator of our nation’s economic strength) consumed by state and local taxes rose from 7.2 percent in 1929 to 12.3 percent for the years 1930, 1931 and 1932 respectively.

I wonder how many members of the Kentucky General Assembly realize that their tax increases during the 2009 legislative session provides a direct threat to the economic strength of our commonwealth and country. Surely, such a negative economic impact must carry at least as much importance as the next political campaign, doesn’t it?

“A government simply cannot tax a country into prosperity,” Laffer writes. “If there were one warning I’d give to all who will listen, it is that federal and state tax policies are on an economic crash trajectory today just as they were in the 1930s.