If you haven't read Bruce Bartlett's complete history of the Laffer Curve, you should. The upshot is that you do not need special circumstances for high tax rates to be capable of inflicting significant damage on the underlying economy. But you do need exceptional circumstances to actually get a free lunch out of the Laffer Curve...
- The Laffer Curve, Part 1: "The Laffer Curve... economist Norman Ture, who worked closely with Rep. Jack Kemp, probably had more to do with popularizing the idea of a tax cut that could pay for itself than economist Arthur Laffer did..."
- The Laffer Curve, Part 2: "The Laffer Curve from the Middle Ages through the 19th century. It begins with the work of Muslim philosopher Ibn Khaldun in the 14th century, whose work came to the attention of economist Robert Mundell in 1971. Mundell brought it to the attention of journalist Jude Wanniski of the Wall Street Journal. Ronald Reagan mentioned Khaldun by name on 11 different occasions as an influence on his thinking.... Jonathan Swift... observed in 1728 that higher tariff rates often led to a decline in revenue. Adam Smith, David Hume, Alexander Hamilton, Jean-Baptiste Say and James Madison are just a few of those who cited Swift.... [In] 19th century tariff history and notes that discussions of the revenue impact of changes in rates of duty often invoked Laffer Curve arguments..."
- The Laffer Curve, Part 3: "Treasury Secretary Andrew Mellon often invoked Laffer Curve arguments in the 1920s. In the 1930s, economists John Maynard Keynes and Joseph Schumpeter made such arguments. In the 1960s, John F. Kennedy used the Laffer Curve to justify his 1963 tax proposal..."
- The 1981 Tax Cut After 30 Years: What Happened to Revenues? by Bruce Bartlett :: SSRN: "The Reagan tax cut. Republicans often assert that it was so expansionary that there was no revenue loss, something the Reagan administration itself never claimed.... The tax cut lost a lot of revenue, but helped the economy transition from high inflation to low inflation at an unexpectedly low economic cost..."
- Reagan's Forgotten Tax Record: "Although Ronald Reagan is best known for cutting taxes, he also enacted many tax increases both as president and governor of California.... Reagan's tax increases... were quite substantial..."