You seem to be referring to the Laffer curve of conservative tax theory.
It is an elementary notion that was popularized by Laffer in a crude and politicized form. It was called the ibn Khaldun curve where I studied in my youth.
In practice the tax cuts of the Bush Jr administration that ( according to Laffer) should have produced higher revenues, had the opposite effect and are largely responsible for the towering debt we now operate under.
Government spending covered by borrowing is responsible for debt, and nothing else. The revenues, mind you, kept growing under Bush, all the way till the financial crisis kicked in: from about $ 1.78 T in 2003, when the Bush tax cuts were enacted, to about $ 2.57 T in 2007. (
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200)
Revenues
were higher, it is just not clear what made them so. You may argue that they would be greater without tax cuts, or the other way around. The fact is that we were spending much more than we were taking in.
The Laffer curve would have predicted that J Paul Getty would shut down all his oil dericks and closed up shop when approaching that tax rate.
He didn't.
What are you talking about? It has precious little to do with J Paul Getty feelings - it has everything to do with resources being yanked out the "real economy" and pushed through the leaky pipes of government, with all the transaction costs, opportunity costs, misallocation and corruption attached. Less capital invested means less capital generated in the next round, i.e. less of a revenue base. Nobody ever disputed that. The question is, will it be
so much less that actual revenues at the same rate of taxation will drop? At any given point, Republicans claim to know that the answer is "Yes", Democrats claim to know that the answer is "No", and both are basically full of it.
No one will close up shop if they are asked to pay the rates they did when Reagan took office .
Be careful with this "no one". Ironically, the very rich are not that affected by higher taxes on the very rich, on the personal level. But proportional underinvestment in businesses run by the not-so-rich very well may close a bunch of shops. Small, science-rich companies I have worked for my whole life are absolutely dependent on repeated injections of capital from venture capitalists. They have less money - I have lower chances of getting funded.
and those rates will solve our current fiscal problems.
No they won't. Our current fiscal problems are caused by spending that always catches up with any increase in revenues. Period. This is like a teenager maxing out her dad's credit cards and telling him to get a second job, so that the "increased revenues" "solve our current problem".