But Laffer’s place of honor within his party was settled long ago. In 1974, he and Jude Wanniski, then a Wall Street Journal editorial writer, began proselytizing among Republicans for a new theory the two had worked out together. The breakthrough moment, at least according to legend, came when Laffer scrawled a curve on a cocktail napkin for Dick Cheney. The Laffer curve, as it came to be known, showed that the tax rate at the bottom, zero percent, and the top, 100 percent, both yielded identical revenue of zero. The curve connecting these numbers indicated that a lower tax rate could produce higher revenue.
Laffer’s more gentle critics, while noting that his curve fails to describe existing reality, have conceded that his curve is correct in the abstract. “There’s no question there’s a Laffer curve,” says Republican economist Douglas Holtz-Eakin. “There’s always a question as to where you are on it.”
Even this limited defense of Laffer is provably untrue. Of course a zero percent tax rate yields zero revenue, but a 100 percent tax rate definitely does not yield zero revenue. Many governments have imposed 100 percent tax rates and have still managed to collect a great deal of revenue. (Ask yourself how the Soviet Union managed to control a vast empire for the better part of a century.) The conservative economist Casey Mulligan has found several examples of democratic states where some people, especially pensioners, faced marginal tax rates at or above 100 percent, and their labor did not disappear. I would personally prefer not to pay a 100 percent income tax, but under such circumstances, I would not cease working. Many other people would make the same choice.
http://nymag.com/intelligencer/2019/06/art-laffer-curve-trump-medal-freedom-tax-cuts.html
Laffer’s more gentle critics, while noting that his curve fails to describe existing reality, have conceded that his curve is correct in the abstract. “There’s no question there’s a Laffer curve,” says Republican economist Douglas Holtz-Eakin. “There’s always a question as to where you are on it.”
Even this limited defense of Laffer is provably untrue. Of course a zero percent tax rate yields zero revenue, but a 100 percent tax rate definitely does not yield zero revenue. Many governments have imposed 100 percent tax rates and have still managed to collect a great deal of revenue. (Ask yourself how the Soviet Union managed to control a vast empire for the better part of a century.) The conservative economist Casey Mulligan has found several examples of democratic states where some people, especially pensioners, faced marginal tax rates at or above 100 percent, and their labor did not disappear. I would personally prefer not to pay a 100 percent income tax, but under such circumstances, I would not cease working. Many other people would make the same choice.
http://nymag.com/intelligencer/2019/06/art-laffer-curve-trump-medal-freedom-tax-cuts.html