Government Exactions and Revenue Deficiencies

The proposition that increases in tax rates discourage market- sector production and may therefore, beyond a certain level, be counterproductive in raising tax revenue is an old issue in the eco- nomic literature. Its recent revival has generated considerable con- troversy and interest among both economists and policy makers. The resolution of this controversy depends on identifying the em- pirical relationship between changes in tax rates and changes in economic activity and, hence, in tax revenue. As yet, however, this relationship has been the subject of little systematic empirical analysis....