In terms of the effect of tax cuts, let me ask you three questions:
- How much tax revenue would the government collect if the tax rate was 0%?
- How much tax revenue would the government collect if the tax rate was 100%?
Hint: The answer to 1 and 2 above is $0. We know the minimums ($0) on the curve occurs at 0% and 100%.
3. What tax rate percentage will produce the most tax revenue for the government?
The answer to question 3 is elusive. The point of diminishing returns depends on numerous varibles. If we are beyond the point of diminishing returns, a reduction in the tax rate will produce more tax revenue.
Only a simpleton would state raising the tax rate will always increase tax revenue. Being able to determine the maximum point on the curve is critical but elusive.
Anybody who wants to raise or lower the tax rate needs to demonstrate that their rate will maximize tax revenue. Then they have to demonstrate the need for that amount of revenue. The second part can wait until the national debt is under control.