There is a detailed explanation of this theory (known as the Laffer Curve) here.
You may also recall hearing about this theory in Economics 101. I'm sure its also mentioned in Economics for Dummies.
The Star column reads:
Then there's the right-wing's childish fantasy that if you lower tax rates, government revenue will actually increase. We can all pay less tax, and government will get more revenue.
Try that one on a 4-year-old. It defies logic. Here's the reality: Data from the OECD demonstrate that, since 1995, tax revenue in Canada has dropped from 36 per cent of GDP to 33 per cent of GDP. That may not sound like much, but it represents a loss of nearly $50 billion a year in public revenue. And we wonder why Canada plunged into a $50 billion deficit magically overnight.
Perhaps a reality check is in order. I know this may be difficult The Star, but for a goof, try it anyway.
1995 GDP: $788.04 Billion, resulting in $283.70 Billion tax revenue
2005 GDP: $1,368.73 Billion, resulting in $451.7 Billion tax revenue
source: IMF Financial Statistics, Canadian Economy Wiki.
Maybe the problem with the Star is they don't have any 4 year olds doing their math.


