As a result of the recently passed healthcare reform bill, many of us will see our taxes go up (directly or indirectly), and it’s time to examine what happens in an economy when taxes are raised.  The Heritage Foundation posted an article on the Laffer Curve a number of years ago.  The article was written by Arthur Laffer, who states in the article that although the Laffer Curve is named after him, he did not invent it.  The information in the article is still valid, and the article is something I wish all of our Congressmen would read and memorize.

According the Mr. Laffer:

“The Laffer Curve, by the way, was not invented by me. For example, Ibn Khaldun, a 14th century Muslim philosopher, wrote in his work The Muqaddimah: “It should be known that at the beginning of the dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments.””

The article also quotes John Mayard Keynes writing that when taxation is too high wealth creation will be slowed and tax revenues will decrease.  (That also needs to be required reading for Congress.)  Please follow the link above to read the entire article.

This is the chart from the article that shows it all: