America


A Napkin That Changed World


50 years ago, Arthur Laff er sketched out an arc-shaped curve proving high taxes generate low revenue.


A BY STEPHEN MOORE


secret meeting 50 years ago during the stagfl ation- ary 1970s has become the stuff of legends.


Two of President Gerald Ford’s


top advisers, Dick Cheney and Don Rumsfeld, huddled with economist Arthur Laff er at a restaurant in Washington, D.C., to fi gure out how to pull America out of its economic funk. Laff er tried to explain that raising


tax rates would make infl ation and unemployment worse. He drew his famous arc-shaped curve on a cloth napkin showing that when tax rates get too high, the reduction in work and investment were so punitive that they could generate less, not more, revenue. At a 100% tax rate, the tax


would produce zero revenue. The curve became


famous shortly thereafter when Wall Street Journal economics writer Jude Wanniski wrote an editorial calling this relationship the Laff er Curve. It turned economics and


the Keynesian orthodoxy — which taught that government spending could


20 NEWSMAX | AUGUST 2025


stimulate economic growth — on its head. Laff er said cutting taxes would


inspire growth while runaway government was crowding out private sector investment and hiring. It took another 10 years for the


idea to really take root when a young former football quarterback, Rep. Jack Kemp, R-N.Y., picked up the idea and convinced then-presidential candidate Ronald Reagan to run down the fi eld with it.


Reagan’s tax cuts, which lowered the top tax rate from 70% to 28%, rescued the economy.


The “supply-siders,” as they were


called, were radical rebels with a new formula for prosperity. Naturally, they were regarded as mad men who were peddling “voodoo economics,” as former President George H.W. Bush memorably called it. But it wasn’t witchcraft. Reagan’s


tax cuts, which lowered the top tax rate from 70% to 28%, rescued the economy and caused an explosion of growth and higher living standards in the go-go ’80s. The supply-siders believed that incentives matter, and that if you tax something, you will get less of it. The supply-siders also argued that


the chief function of money is to be a storehouse of value and to retain that value over time. It wasn’t only Republicans who


Democrats Still Don’t Get It P


erhaps the greatest vindication of the Laff er Curve is that from 1980 to 2010, more than 50 nations


lowered their tax rates. Alas, few modern Democrat leaders in the U.S. have endorsed lower tax rates, which they say is only a ruse to “cut taxes for millionaires and billionaires.” We have Sens. Bernie Sanders of Vermont and


Elizabeth Warren of Massachusetts arguing for a return to 50% and 60% and 70% tax rates. They’ve learned nothing in these last 50 years. They and other flocks of skeptics should read Arthur


Laff er’s latest book, Taxes Have Consequences. In it, Laff er and his co-authors prove definitively that every time income tax rates have been cut over the last 100 years, three good things have happened: Tax revenues have risen. The economy has improved. The rich have paid a higher share of the tax burden. That’s not pixie dust or voodoo. It’s an iron-clad economic fact of life. — S.M.


saw the light and signed up for this new economic theory. Many leading Democrats revolted in the late ’70s and early ’80s: Sam Nunn, Dick Gephardt, Lloyd Bentsen, Bill Bradley, and Phil Gramm (before his Republican switch) subscribed to the idea that tax rate reductions could regenerate American economic might. In 1986, Congress passed


a bill that eliminated many loopholes and lowered income tax rates to 28%. Over the next 20 years,


the U.S. gained some 40 million new jobs and infl ation was gone.


Stephen Moore is a co-founder of Unleash Prosperity and has served as a senior economic adviser to Donald Trump.


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