Now, we all know that the Laffer Curve exists, that\’s a simple piece of maths. Where all the argument comes in is at what tax rates do we start to see Laffer Curve effects?
Such effects can go either way: a fall in tax rates leading to higher tax collections, or a rise in tax rates leading to lower such revenues. The Guardian tells us that we\’ve actually spotted one such Laffer effect in the wild:
The last time a windfall tax was imposed on North Sea operators in 2005, it brought short-term gains to the Treasury but led to a slump in drilling activity that ultimately cut tax revenues.