ORANGE COUNTY IN BANKRUPTCY : Supply-Side Guru Laffer Joins Sales Tax Hike Foes : Recovery: Economist tells Irvine gathering that increase would only drive shoppers out of county. Ex-Mayor Agran supports group but says public deserves voice in decision.

Supply-side economics guru Arthur Laffer joined a small gathering of anti-tax crusaders Wednesday morning to warn that any attempt to bail out the county treasury with a sales tax increase will backfire.

“I just have never heard of a situation where you tax a county into prosperity,” Laffer said, warning that shoppers and businesses would move to surrounding counties where the sales tax is lower.

By way of example, Laffer told the gathering of about a dozen people that Wisconsin residents travel to Chicago to load up on “hooch” because of that city’s low liquor taxes.

“Don’t think that won’t happen to you,” he said. “People can go over county lines and shop.”

It would take more than a half-cent increase to boost Orange County’s 7.75% sales tax above the 8.5% sales tax in Los Angeles County. The sales tax in Riverside County is 7.75% and in San Diego County 7%.

Laffer was brought to the Irvine Holiday Inn by Citizens Against Unfair Taxation, a group founded in 1984 to oppose the county’s Proposition A, a 1-cent sales tax proposal for transportation improvements that was soundly defeated by voters. Laffer was flanked by representatives from the Howard Jarvis Taxpayers Assn., the Reason Foundation and former tax-fighter Paul Gann’s People’s Advocate group.

Although the Board of Supervisors has said it opposes new taxes to help the county out of its financial morass, members of the Orange County Business Council said Tuesday that a tax increase is unavoidable if the county hopes to recover fully. The business group engineered a payout proposal for investors in the collapsed county investment pool, which the supervisors unanimously approved.

Veteran tax opponent Tom Rogers, head of Citizens Against Unfair Taxation, said he will wage a war against any tax increase. Rogers said the business leaders who are proposing the tax hike are the same executives who backed the failed Proposition A.

“It’s the same rats--just a different race,” Rogers said.

Laffer and others say they are not unalterably opposed to a tax increase, but they believe it is far too early to consider one.

“I think the privatization solutions should be looked at first, not last,” Laffer said. “I think taxes should be looked at last, not first.”

Laffer and colleagues suggest the county could raise significant funds by selling John Wayne Airport and other operations, including waste disposal. But the economist whose theory that cutting taxes raises government revenue won national prominence during Ronald Reagan’s presidency kept his remarks narrowly focused on the tax issue, brushing aside a question about calls from some city officials for the restructuring of county government.

Former Irvine Mayor Larry Agran, who helped fight the 1986 tax proposal, attended the anti-tax gathering and is lending his support to the group’s efforts. While saying he agrees in substance with Laffer’s remarks, Agran said his biggest concern is that the tax increase is being proposed by a small group of business leaders without broad public participation.

“Ordinary people have to be consulted,” Agran said. “If this is something that a few business people try to impose from on high, working in league with the Board of Supervisors, that will compound the tragedy. It will create not only the appearance but the reality that ordinary citizens are not a part of the solution.”