Skip to content

Laffer Curve basics

Since anyone but a progressive like Betty Sutton will readily admit that taxes affect people’s behavior, how can a government get the most revenue from income taxes? By setting the right income tax rate, of course. If the government doesn’t tax income at all, it obviously gets no revenue. If it taxes every last cent of income, it also gets no revenue (since nobody would have any incentive to work in the first place). Somewhere in between is a “sweet spot.”

Remember that we’re just trying to figure out how to maximize revenue from income taxes, not whether it should be maximized.

Want an even simpler explanation? Go look at Tax Cuts 101. Now for a look at what not to do:

Those of my readers who happen to work for a certain ex-union-lawyer career politician should pass this on to the boss and ask her to look at the big picture.