Low assessments early in a dynasty yield more revenue than high assessments late, because high rates destroy the activity being taxed.
The Muqaddimah states it plainly: at the beginning of the dynasty, taxation yields a large revenue from small assessments; at the end, a small revenue from large assessments. The mechanism Ibn Khaldun gives is behavioural rather than arithmetic — when the hope of profit is destroyed, business withdraws — and he ties the cycle to the dynasty's growing costs.
In practice
- A city that doubles its trading levy finds the merchants have moved to the next city and the receipts have fallen.
- A treasury projecting revenue from a rate rise without estimating the withdrawal it causes will overstate the take.
- Standing
- Laffer credited Ibn Khaldun rather than claiming originality; the ledger's Laffer Curve entry is the later restatement.
- Subject
- Economics & Incentives
- Essay
- The theories behind every argument about money