It's as close to an established truth as you'll find in economics that there is a "sweet spot" for taxation, at which government revenues are maximized. That point is the apex of the Laffer Curve. Tax above the apex, and government revenues decline as earners hide their money, channel it into unproductive tax shelters, or flee overseas. Tax below the apex, and you're just not taxing efficiently. The rich spend their money on solar powered dog polishers, or breeding new Kennedys, while government starves.
Then there's Brunei, where one family owns everything and pays no taxes. The ruling Sultan provides a generous welfare state from his own pocket, and his family, well…
What do they do with all that money, and no jobs?
They commission life-sized ultrarealistic pornographic statues of themselves, that's what.
Lawyers for Prince Jefri Bolkiah, the kid brother of the Sultan of Brunei, don't want jurors to hear anything about his four sex trophies in a blockbuster real estate trial opening next week in Manhattan Supreme Court.
Unfortunately for Prince Jefri, he had to sue his real estate developer in New York, rather than Brunei, which lacked jurisdiction. Unlike Brunei, New York has open courts, liberal discovery, and no procedural or evidentiary rules favoring royalty. So word of the statues decorating his New York estate, which depict Prince Jefri sharing the wealth with his wives, trickled out, all the way to the New York Daily News.
And there our economics lesson continues. According to theory, by taxing the wealthy, such as Prince Jefri, at low rates the government ensures that their wealth will "trickle down" to others engaged in valuable trades and industries, like ultrarealistic porn sculptors.
Supposedly the statues illustrate the concept of trickling down, in great detail.
Now you're probably asking, "What's the point of dressing up this tawdry story with all this shaggy dog economics talk?". Well, I could say that we're going to be hearing a lot about the estate tax with the new Republican Congress, and it's important to remind ourselves of what the children of inherited wealth actually do with their unearned money. This is an educational post, with an important message to share about tax policy.
But I'd be lying.