"In the early stages of the state, taxes are light in their incidence, but fetch in a large revenue... As time passes and kings succeed each other, they lose their tribal habits in favor of more civilized ones. Their needs and exigencies grow...owing to the luxury in which they have been brought up. Hence they impose fresh taxes on their subjects... sharply raise the rate of old taxes to increase their yield... But the effects on business of this rise in taxation make themselves felt. For business men are soon discouraged by the comparison of their profits with the burden of their taxes... Consequently production falls off, and with it the yield of taxation." "At a tax rate of 0 percent, the government would collect no tax revenues, no matter how large the tax base. Likewise, at a tax rate of 100 percent, the government would also collect no tax revenues because no one would willingly work for an after-tax wage of zero (i.e., there would be no tax base). Between these two extremes there are two tax rates that will collect the same amount of revenue: a high tax rate on a small tax base and a low tax rate on a large tax base." Tags: TaxesQuotesMoneyLaffer CurveJust Thinking ChronologyIbn KhaldunDeficits Log in or register to post comments