Laffer Curve

Laffer himself originally described it as having been a thought experiment, but it does contain some interesting analysis. In short, the curve seeks to examine the effect of the tax rate on government revenue. At the very far left, we see the inarguable fact that if the tax rate is zero, government revenue will also be zero. (Duh.) But at the far right end, it points out the only slightly less obvious point that if the government tax rate is 100% the revenue will also be zero because no sane tax payer would continue working if Uncle Sam was taking all of his hard earned wages. Laffer theorized that there must be some point on this curve where government revenue would be maximized, and any higher rate of taxation would result in diminishing returns.
The real problem with the Laffer Curve is that you never know exactly where you are on it at any given time, where the actual peak is, or what happens when you tweak any of the factors involved. It’s useful in a general sense, as I said, but it’s basically economic voodoo when you try to pin it to a certain date in time. Over the decades some analysts have placed the peak revenue sweet spot as high as 70% taxation. Other more conservative voices swear, depending which country you’re talking about, it can’t be above 20.