The Economic Collapse of 2011?

That’s what economist Arthur Laffer is predicting, and it is unfortunate that his Wall Street Journal column is so logical.

According to a 2004 U.S. Treasury report, “high income taxpayers accelerated the receipt of wages and year-end bonuses from 1993 to 1992—over $15 billion—in order to avoid the effects of the anticipated increase in the top rate from 31% to 39.6%. At the end of 1993, taxpayers shifted wages and bonuses yet again to avoid the increase in Medicare taxes that went into effect beginning 1994.”

Just remember what happened to auto sales when the cash for clunkers program ended. Or how about new housing sales when the $8,000 tax credit ended? It isn’t rocket surgery, as the Ivy League professor said.

On or about Jan. 1, 2011, federal, state and local tax rates are scheduled to rise quite sharply. President George W. Bush’s tax cuts expire on that date, meaning that the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero.

Laffer goes on to note that as a result of this coming tax increase, people will of course shift  production and income from 2011 into 2010, inflating income for 2010. The same goes for demand; the result of all this is that when we slip past that Jan. 1 tax boundary, “the train goes off the tracks” and the United States ends up in a double-dip recession. Not only that, lower earnings and sales combined with inflation will also result in fewer tax receipts; believe it or not, lower tax rates result in higher government receipts. Despite the fact that I hate the idea of the government having more money, if it is the side effect of individual Americans and American companies being more prosperous, I’ll take it. Just send all of that dough to the military.

You really need to read the entire op-ed. It ain’t gonna be pretty, particularly with the way this administration intends to keep spending, taxing, and printing money.