I recenty ran across, for the umpteenth time, a comment thread where some left-leaning person was saying, "Conservatives actually believe you can INCREASE government revenues by LOWERING taxes."
Now, if there is some conservative who thinks you can always raise revenues by lowering taxes, they are obviously nuts. (If the tax is at, say, 1%, you cannot get more revenue by lowering it to 0%.) But if some liberal thinks you can never increase revenues by lowering taxes, they are every bit as nuts. Essentially, the latter position involves the belief that price has no effect on demand. An nice example of a case where raising a tax caused revenues to plunge is the Smoot-Hawley Tariff.
Now, whether Arthur Laffer was right that, in 1980, taxes were high enough that lowering them would increase revenues is an empirical question. But the notion of the Laffer Curve, meaning that there is some level at which a decrease in taxes will raise revenues, is a simple matter of economic logic.
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