<p>In 1980, Ronald Reagan was elected as a president on a simple platform: the need for tax cuts to revive the economy, which was struggling at the time. His theory, and the theory of the supply-side economists who supported him, was simple. Business owners are more likely to hire new workers and invest in new equipment if their after-tax income goes up. The supply-siders of the day believed that if federal tax rates were cut, especially at the top end, business owners would expand, boosting both employment and investment, increasing growth, and potentially even reducing inflation, which was a big problem at the time. Thus, the benefits of the tax cut would “trickle down” to all Americans. One of the main proponents of this theory was an economist called Arthur Laffer, who, in 1974, had been enjoying a late-night supper with a few Republican policy wonks (including Dick Cheney and Donald Rumsfeld, as it happened). The topic of conversation was tax rate and government income and whether President Ford's tax hikes would spur increases in federal revenue. Not necessarily, suggested Laffer, who reportedly whipped out a pen and made the following sketch on his napkin (Figure 1).<span><sup>1</sup></span>