photo: afpCutting tax rates in the highest income tax brackets has the most positive impact on tax revenues and the economic growth. The optimal tax system is one where taxpayers recognise their obligations to pay taxes and believe the tax system is fair and equitable. For example, say the tax code has a flat tax rate of 10%. The elasticity of supply of taxable income is the greatest in the highest income brackets. Tax rate cuts in the highest income tax brackets have the most positive tax revenue and growth impacts.
