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LETTERS : Laffer Just Throwing Us Another Curve?

February 17, 1985

The article by Arthur B. Laffer, "Tax Plan Needs a Minor Tuneup" (Times Board of Economists, Feb. 5) screams for a rebuttal.

Laffer finds fault with the Treasury's proposal to treat capital gains as ordinary income. His reasoning is that capital gains, rather than being so considered, should be exempt from any levy. It is, says he, double taxation. Double taxation? Yes, asserts Laffer (is he serious, or just throwing us another "curve"?), since a capital gain is the appreciation in value of an asset resulting from an increase in that asset's capacity to earn money. And since this increase in earned money is to be taxed, additional tax on the increased value is double taxation.

Observing the most public arena for the creation of capital gains--the stock market--one wonders where Laffer gets his original supposition. After all, rises in the stock market averages do not represent increased earnings.

Real estate, another large source of capital gain, would be turned into a great money machine by Laffer's rule. Imagine the fun of using up the depreciation allowances, then selling the property to your spouse at a huge sum (no capital gain tax problem, of course) to get even larger depreciation allowances. Oh, what a speculator's heaven I foresee!

Laffer, the article noted, is an economic adviser to the Reagan Administration. It figures.

WILFRED COUZIN

Laguna Niguel

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