Read it at Angry Bear
Mike Kimel at Angry Bear has several nice posts on the "Laffer Curve"
Posted by Dan Crawford (Rdan)
Laffer assumed that tax revenue is zero at tax rates of 0 and 100%, but this is only true if the tax rate is 100% and not the marginal rate. The actual curve doesn't look at all like Laffer assumed.
Not only that, as one of Kimel's commenters, Robert Waldmann points out, we actually have experience with a country having a top marginal rate over 100%, Sweden in the 1970s. Contrary to Laffer, not only was tax revenue not equal to zero, in 1975, Sweden's tax revenue was 41.3% of gross domestic product! (OECD statistics, click on "data by theme," then "public sector, taxation, and market regulation," then "taxation," then "revenue statistics - OECD member countries," then "comparative tables") 21.2% was central government revenue, i.e. excluding subnational government and social security. Either way, a long way from zero.
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