I was discussing the Laffer curve with a friend of mine who is a big fan of Milton Friedman and Laffer himself. I know there are several Austrian critiques of the Laffer curve, but one of my critiques against it was that it assumes that maximizing government revenue is also what is best for the economy.
In other words, the Laffer curve was explained that the government should find that tax rate that is "just right," so as to not stifle growth and shrink the tax base, but to get as much as it can up until that point. My observation was that the government maximizing its revenue is a bad thing for the economy, because anything that the government takes in is necessarily lost from the private sector and incurs opportunity costs.
My friend was adamant that the right tax rate, which he said was lower than it is now, would be optimal for growth and to support government functions. I said ANY tax is necessarily a sap on economic growth. My friend looked at me as if I had suddenly started speaking Swahili.
Query: am I on the right track? Is there a better way to explain this? This friend is a conservative who is starting to come around to libertarian/Austrian precepts (against the Fed, gold standard, etc.), but does not seem quite ready to let go of some of the monetarist leanings.
" but one of my critiques against it was that it assumes that maximizing government revenue is also what is best for the economy."
<= I don't think that's a relevant critique. I don't think the laffer curve presupposes anything moral. It only says: 'if you want to maximize government revenue, it might be a good idea to lower taxes past a certain point.' (Rothbard would say that this alone presupposes a moral judgement pro statism. Or, to be more precise, I remember Rothbard writing down a point like that, but I could be wrong.)
", which he said was lower than it is now,"
<= He can't know that for sure.
In any case: "I said ANY tax is necessarily a sap on economic growth. " <= define what you mean by him. I'll bet he presupposes that government 'ought' to do certain things (because the market can't handle it). If so, than he will look at you weird when saying something like 'taxes always stiffle economic growth'. The debate is really about 'what can('t) the market do', as far as I see. The laffer curve just distracts attention from the real difference between you guys.
The state is not the enemy. The idea of the state is.