Supply Side EconomicsMike Rappaport

Supply side economics argues that a reduction in tax rates will not generally reduce tax revenues by a proportional amount.  For example, a reduction in tax rates from 50 percent to 25 percent will not cause a halving of tax revenues.  The big question is how much less than the proportional amount the reduction in revenues will be.  I have always thought the question turned on the level of the existing tax rates and the type of tax being reduced.  In some (rare) cases, the tax system will be on the part of the Laffer curve such that a reduction in rates results in no less revenue. 

Greg Mankiw discusses the issue at his blog here.