Laffer Curve: Higher Taxes Don’t Necessarily Mean Increased Government Revenues

Commentary In the early 1980s, I had the privilege of meeting and speaking with American economist Arthur Laffer on two occasions. The trust company that I worked for at the time hired him as an economic adviser to speak to our investment staff. We received his published works. At the time, he was a controversial figure in some corners due to his aptly named “Laffer Curve.” Laffer postulated that governments raise no revenue when tax rates are at either zero percent or 100 percent, but there’s a rate between those two extremes that maximizes tax revenue. In other words, at some point there must be a level of taxes that would collect the most money possible for the government and any further tax increases would lower economic activity to the point that less and less tax would be collected, approaching zero....