Important as it is for public policy, there is still no consensus about the size of the revenue-maximizing tax rate at the top of the Laffer curve. The purpose of this essay is not to supply a correct rate, but to identify difficulties in doing so. 1) Estimates of the revenue-maximizing tax rate...

Through tax evasion, through the labour-leisure choice or in other ways, taxpayers reduce the tax base in response to an increase in the tax rate. The process is commonly-believed to generate a humped Laffer curve with a revenue-maximizing tax rate well short of 100%. That need not be so. In the...