Laffer: If you tax something more, you get less

One of the world's most renowned experts in political economy, Professor Arthur Laffer, held a lecture at the Faculty of Economics in Sarajevo on the topic “The Shadow Economy in Bosnia and Herzegovina and its Implications for the Economy“ for domestic economic experts, as well as professors and students of the Faculty of Economics at the University of Sarajevo.

Professor Laffer is known as the creator of the “Laffer Curve“, a concept that shows what happens when a government significantly increases the tax rate. Although the intention is to increase budget revenues by increasing the tax rate, in practice, excessively raising the tax burden becomes counterproductive, leading to a decrease in tax revenues and a shift of both funds and labor to the black market.

On the Laffer Curve, there is a so-called optimal tax rate, one that increases government revenue, as well as employment, productivity, and production. 

Laffer said that if you tax something, you get less. He claims that the state needs low tax rates, because in that case there would be no tax evasion or undeclared employment. He is resigned about the unemployment rate in BiH, which is 45%. However, if the authorities further increase the tax rate, that rate could be much higher, claims Laffer. 

On the Laffer Curve, there is a so-called optimal tax rate, one that increases government revenue, as well as employment, productivity, and production. 

- We are extremely honored by the visit of Professor Laffer to our Faculty. This is a great honor for us to meet and hear one of the greatest economic experts in the world. We are grateful that Professor Laffer chose our faculty for this unique lecture - said Prof. Dr. Kemal Kozarić, Dean of the Faculty of Economics in Sarajevo.

Professor Laffer, whom Time magazine ranked among the greatest minds of the 20th century, led the team that created the economic policy of President Ronald Reagan for both of his terms (1981-1989). He was a member of the Reagan-Bush Finance Executive Committee in 1984, as well as an advisor to Prime Minister Margaret Thatcher on fiscal policy in Great Britain during the 1980s.

Professor Laffer graduated from Yale University (USA) and received his doctorate from Stanford University. Today, he heads the companies “Laffer Associates“ and “Laffer Investments“, which conduct research and manage investments for state institutions, pension funds, corporations, and funds worldwide.