People like Arthur Laffer have rightly observed that there is a marginal tax rate that produces the greatest level of government revenue. When the tax rate is above that number, reducing the rate actually results in more revenue. It is interesting to note that socialists (er, “progressives”) always seem to agitate for a higher rate, no matter where the optimum is. Conservatives tend to lobby for a lower rate.
(Neither party seems to care about the Rahn Curve, which indicates that when the total tax burden exceeds about 20%, people change their behavior to reduce the amount of taxes they pay. This is the psychological point where leisure starts to become more valuable than work.)
Having said this, the entire discussion misses the most important issue. Here in the land of the (stilll somewhat) free, our government was instituted in order to “secure the blessings of liberty.” The bigger that government becomes, the less liberty it can allow us to have, if only that we must work more hours in a month to pay for it.
So similar to the Laffer Curve, the Liberty Curve has zero liberty when we have 100% government (like in North Korea) and zero liberty at 0% government (like in Samolia).
Our goal as citizens must NOT be to tune the tax tables to optimize government revenues and thus government’s intrusion in our lives, it must be to tune the size and scope of government in order to optimize our liberty.
While the Laffer Curve is useful for this purpose, but we must pay more attention to the Liberty Curve instead.
The Rahn Curve shows us that when tax rates get above about 20%, people who do have some measure of control over how they structure their financial affairs take active steps to decline to pay more in taxes. It is just a fact of life that any politician attempting to increase revenues by raising taxes will be disappointed, and any plans and budgets that depend on those higher revenues will fail.
see: The Rahn Curve and the Growth-Maximizing Level of Government
http://www.youtube.com/watch?v=uj6lRFXC5rA
I think you get my point about the Laffer Curve, that although correct (lower taxes lead to more government revenue), more government revenue is not the justification for low taxes. It isn’t government’s interest we in America care about. It is the interests of the individual we care about. It’s not “supply side” that justifies low taxes, but an individual’s right to his property.
A man’s right to his property is equal to his right to Life, Liberty, and Free Pursuits. As Madison said, “As a man is said to have a right to his property, he may be equally said to have a property in his rights.” A man has as much right to his property of money and land as he does to the property of his freedom.
I like the sound of your Liberty Curve, but I've never heard of it nor seen it.