I was yesterday morning on CNBC debating Arthur Laffer on supply side economics and the Bush tax cuts. Laffer is the father of the "Laffer Curve", the idea that tax cuts will not increase the budget deficit but would rather be self-financing given the strong suplly side response of labor, savings and investment to tax cuts. George Bush father referred to Supply Side Economics as "Voodoo Economics" when he was running for the Republican Presidential nomination against Ronald Reagan in 1980. Twenty five year later, supply side tax cuts are still Vooodo Economics!
So, what's wrong with the Laffer Curve? Won't tax revenues fall to zero if tax rates were either 100% or 0%? If yes, then it must be true that tax revenues must be same for atleast two different tax rates (otherwise how do you connect the dots at the 100% and 0% rates).