People can also change the timing of when they earn and receive their income in response to government policies.
Arthur LafferLet me just try to give you sort of the intuitive one here on the stimulus funds. If you have a two-person economy - let's imagine we have two farms, and that's the whole world, just two farms. If one of those farmers gets unemployment benefits, who do you think pays for him? Am I going way over your heads today?
Arthur LafferWith the shrinking of the US economy, and it's shrinking very rapidly, you not only have more money, but you also have fewer goods. That's a classic double-whammy on inflation.
Arthur LafferLet's take the nine states that have no income tax and compare them with the nine states with the highest income tax rates in the nation. If you look at the economic metrics over the last decade for both groups, the zero-income-tax-rate states outperform the highest-income-tax-rate states by a fairly sizable amount.
Arthur Laffer