The Basics of Supply-Side Economics

Although it is only one aspect of supply-side economics, the Laffer Curve has come to represent what it was all about, in the
minds of most people. It simply makes the indisputably true point that neither a zero percent tax rate nor a 100 percent tax rate
collect any revenue; the former because there is no tax and the latter because no one will earn taxable income, knowing that the
government will confiscate all of it.

The Laffer Curve implies that there is some point between zero and 100 percent that will maximize revenue. If rates are above
this point—in the prohibitive range—then a tax rate reduction could theoretically raise revenue. A more important lesson of the Laffer Curve is that there are always two tax rates that will collect the same revenue—a high rate on a small base and a low rate
on a large base.