You are really hitting a key issue here...the idea of manipulating the tax rates based on economic expansion sounds good, but in practice, politicians HATE cutting taxes...and can't be relied on to do so no matter what they say. Recall that the max rate was to be 28% when all those deductions went away...but one the deductions were gone, the rates went back up. The other side of this issue is an economic phenomenon known as the backward bending supply curve of labor. Labor is the only thing which will reduce the available supply if either (a)one's income is so large as to make the laborer reduce work time to enjoy the benefits of his labor, or (b) which will also decline on the part of the most productive if the incentives are diminished. If you increase taxes (reduce incentives) you also make the role of the risk-taker (read:job creator) less attractive, and he will withdraw both labor and capital.
The Laffer Curve establishes that there is an optimal tax rate, which can be discovered through trial and error, and once discovered, should be adopted permanently.
Here is a link to see the labor supply curve:
http://www.pinkmonkey.com/studyguides/subjects/eco/chap14/e1414301.asp
Chuck_101 said:
"The Laffer Curve establishes that there is an optimal tax rate, which can be discovered through trial and error, and once discovered, should be adopted permanently." Our nation's Founders would be outraged that we are discussing as "optimal" that tax rate which is so high that further increases in the rate lead to reduced government revenue. Only the tremendous productivity of technology has allowed this situation to occur. But it puts government in control of a proportion of expenditures which is unhealthy for a free people.