It's fun to read the wingnuts sometimes. Don Luskin (who used to spend most of his time baiting Paul Krugman, before Krugman's NYT articles disappeared behind a paywall) says (endorsing an anonymous reader's comment) that JFK was a "supply-sider". The reason? 'In August 1962 he proposed slashing the top marginal tax rate from 90%, calling it "a creative tax cut, creating more jobs and income, and eventually more revenue."'
Hm. India too used to have such absurd tax rates. And in Britain it went as high as 95% (as George Harrison sang: "There's one for you, nineteen for me, 'cause I'm the taxman.") But today I doubt there's a single person, economist or otherwise, who thinks that a marginal tax rate of 90% will boost either the economy or the government's revenues. Does that mean we're all supply-siders now?
Leading from which, here's a question that's always bothered me. Why not supply-side the tax itself, in the form of taxing products, not incomes? We do tax products (formerly sales tax, now VAT), but what if we taxed them a bit more -- the tax increasing according to luxury value, but not becoming exorbitant -- and removed all income tax?
In India, everyone buys things, but fewer than 4% of the population pays income tax. And that's not because 96% of us are wallowing in poverty. Income tax evasion is astronomical. And the evaders tend to be among the richest people: even if they do pay tax, they do not declare all their income. Only the salaried class is honest, because they're forced to be: it's deducted at source.
If we decided that income tax merely annoys citizens and abolished it, replacing it with an equitable scheme of taxing products (being careful not to tax products that the poor depend on), why wouldn't that work? Could we even have "negative taxes" on essential items?