The Laffer Curve (above) is the supply-side model in simple form. What it basically says is that at 0% tax, there is 0% revenue. And at 100% tax, there is a 100% disincentive to go to work, so there's also 0% revenue. On the bottom (unshaded) part of the curve, raising tax rates increases revenue. On the top (shaded) half, raising taxes actually has a negative effect on revenues, as at that level the disincentives to work, or the incentives to shelter income, cheat on taxes, move business offshore, turn down overtime, or other natural reaction to confiscatory rates "shrinks the pie." So, in theory, when top rates were 90% under JFK and he slashed them to 70%, the resulting increase in revenue was due to the fact that we were on the top side of the curve. Same thing with Reagan's cut from 70% top rates down to 28% (which gradually climbed back to 39% under Clinton). Bush's cut from 39% down to 35% produced a less-dramatic effect, not only because the cut was less, but because that rate is (presumably) further out toward the right side of the curve.
The trick is, we don't know where exactly that rightmost part of the curve lies at which revenue is maximized. It could be 35% (in which case we're perfect already). It could be lower. It could be higher. Again, I know that's supply-side heresy, but if we cut taxes to the point that revenue goes DOWN, then we may be making moral or political sense, but we're not making economic sense. It does NOT naturally follow that every rate cut is a good thing... or else the perfect tax rate would devolve to zero, at which point we have no revenue, either, and therefore no interstates or army. But, on the other hand, raising a rate just because some folks want to play class-envy games is only a good idea if it can be done without shrinking the pie and having the opposite effect of what is intended. And notice that none of this addresses other factors, like what is the maximum "fair" rate (I have already posited that in my mind, an effective rate of 33% is about where I'd stop... which may be achieved with a higher top marginal rate). Also, this doesn't address other issues like the child tax credit, the home interest deduction, or the elimination of the "marriage penalty," all of which are concerned with other factors besides revenue.
So, anyway, my point with regard to this upcoming election is this. McCain promises to make the Bush tax cuts permanent. (If that doesn't happen, they'll expire in 2010. This will result in a tax increase for almost everybody who pays taxes.) Obama says he wants to eliminate the $102,000 cap on social security taxes and also go back to the old Clinton rates. But Obama has already said he'd exmpt the folks making $102-250k from the first, and I'll bet a dollar to a doughnut that he'd find a way to raise the top rates without messing too badly with the folks in the lower brackets whose votes he needs. I oppose that, as it gets that top bracket into effective rates of over my "magic number" of a third, and also as I think that probably moves us into the area of shrinking the economy. My advice would be to stand pat on rates. They are awfully close to "Goldilocks" rates right now. Maybe undertake some reforms that help the "little guy" whose FICA bill is higher than his income taxes, like increasing the child tax credit and having it also count against FICA tax. But generally, I'd say that politicians should apply their own version of the Hippocratic Oath: "first, do no harm."