Lowering taxes to boost tax revenue

In the 1930s, John Maynard Keynes argued that lower tax rates can sometimes increase government revenues. He wrote in his 1933 book The Means to Prosperity: “Nor should the argument seem strange that taxation may be so high as to defeat its object, and that given sufficient time to gather the fruits, a reduction of taxation will run a better chance than an increase of balancing the budget.” More than half a millennium before him, the great Muslim scholar Ibne Khaldun had also argued in his masterpiece, The Muqaddimah, that high taxes were often a factor in causing empires to collapse, resulting in lower revenues despite higher rates. In between them, Jonathan Swift, the satirist and author of Gulliver’s Travels, in a 1728 article, noted the negative effects of high tax rates on government revenues. He also influenced many of his contemporaries, like Adam Smith, regarding the harmful effects of high tax rates on revenues.