> Taxes reduces taxes?
Yes. It’s a second-order effect. Imagine if there were a 100% tax: the government would probably get no taxes, because there would be no economy.
> So are you saying that 0% rate taxes would capture the most tax?
No. There’s a sweet spot. Everyone argues about where it is, but obviously 0% and 100% tax rates would both be problems.
It all depends on where you apply the taxes.
If you tax inputs but not outputs, then a 100% tax rate increases the cost of goods and services but does not necessarily kill the business.
If you tax income, then a 100% tax rate kills all income. However, income taxes are usually progressively, so a 100% marginal tax rate places a cap on income, but income below that can exist.
If you tax profit, a 100% tax rate leads to shifting profits to reinvestment and salaries and benefits.
> If you tax profit, a 100% tax rate leads to shifting profits to reinvestment and salaries and benefits.
There wouldn't be any money to reinvest into salaries and benefits, because capital would not be deployed on a risky, potentially money-losing venture without the possibility of profit.
There are taxes on things which generally don't have this kind of effect on supply such as land, because land is an inelastic supply because it cannot be destroyed.
However if the tax is too high then it would cause land abandonment.