The Laffer curve may not be known to many Americans, but it is well known to economists. It is an economic theory that supports “supply side” economics. There are many opinions about the relationship between tax rates and government revenue as described by the Laffer curve. But the fact is, decreasing taxes also decreases tax revenue, and increased economic activity does not make up the difference.
The real test of this theory is how it actually performed in practice. It was the guiding economic principle of the George W. Bush administration from 2000 to 2008. We know how that worked out – financial meltdown, massive unemployment, loss of trillions because of the housing crisis, and the worst economic conditions of my lifetime (66 years). Equally troubling is the economic inequality which has increased dramatically during this period, too. There are many reasons for this debacle not the least of which is the Bush tax cuts which were justified by using the Laffer curve.
Let’s not repeat the same mistake again.
Barry J. Mayworm