Posing the question - "what is the best way to increase tax revenue?" - there are some that would say that the simple answer is to increase tax rates especially on those earning higher incomes. Their reasoning being that this would obviously increase tax revenue since it would direct more of the taxpayers earnings to the government. In a world where the earnings were a constant then this might be true - but - earnings do not stay constant and are effected by what goes on in the country and world that affects the economy. The fact is that increasing the tax rate could decrease tax revenue if earnings taken out of the private sector caused business activity to decline that then diminished the earnings of business and individuals.

As an example let's look at the manner in which businesses set the price of a product to maximize sales revenue. Consumers in a competitive market shop to obtain the products they require to meet their needs and desires within a specific limited income. Therefore they are seeking the best price on any given product. Suppliers of products wishing to sell to these consumers market them at a price where the total revenue realized for the number of products sold is maximized. If the price is too high fewer products will be sold and potential sales revenue is diminished. If the price is to low sales revenue will also be diminished since there is a point where the market cannot absorb any more units. This should be obvious to anyone that has been exposed to Economics 101.

Similarly when tax rates are raised on the earnings of taxpayers the amount of income they have left to spend or save is diminished. This thus reduces taxpayers spendable and investment income. With less to spend on products and services the revenue producers of merchandise and suppliers of services derive less income on which to pay taxes.

There are those who would argue that the government spends the tax revenue it receives and thus it is not really taken out of the economy. The obvious rebuttal to this argument is that the government does not spend the money in the same manner as do those in the private sector where there is the element of individual need and desire for products and services that drive attendant suppliers to produce to meet these needs. This element is the basis for creating new products and services that result in new companies, jobs and increased gross national product. All one has to do is look at Microsoft as an example.

We must also not forget that the private sector provides the funds for investments that are utilized by businesses to develop and employ people. When taxes are increased the availability of such funds are decreased. Thus, the economy is affected by the diminution of savings as a source of investment funding available through the banking system.

We should then conclude that the answer to the question - "what is the best way to increase revenue?" - is to maximize revenue by allowing taxpayers of all types, businesses and individuals at all earning levels, to keep more of their income. With a resulting higher overall income to tax at a rate that will not dampen but enhance economic growth the certain result will be higher overall tax revenue to be used for productive use by the Government. The Goose that lays the golden egg will thus be allowed to survive to lay an ever-increasing number over time.