Tax policy discussions are meant to do what? Arrive at a rational policy, or garner votes. I think it is the latter. What is lost in all the debate over tax increases versus tax cuts, is science. Contrary to what most people may think, there is some scientific study of taxation.
Applying The Laffer Curve To Tax Policy
Invented by Arthur Laffer, the Laffer curve shows the relationship between tax rates and tax revenue collected. It demonstrates a simple principle that very few people understand, but one that is crucial to proper governance. It is the idea that as you raise taxes, you reach some point where actual revenues collected begin to drop.
This is perfectly logical, and you can understand it at the extremes. If the government took 95% of your income in taxes after the first $10,000, would you work much after that? Do they get any more taxes if you don’t work more? No. More money will actually be collected if they take a lower percentage, right?
Now add to this the fact that every dollar the government takes can’t be invested into new businesses or the expansion of existing businesses. New business investment means new...
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