The Productivity Dividend: Why Low Taxes, Deregulation, and Innovation Incentives Outperform High-Tax Regimes

This paper mounts a systematic, empirically grounded challenge to the doctrine that high statutory tax rates reliably maximise public revenue and social welfare. Drawing on the theoretical frameworks of the Laffer Curve and supply-side economics, as well as comparative evidence from Ireland, Estonia, Singapore, the United States, and Brazil, we demonstrate that economies operating beyond the revenue-maximising tax rate suffer compound losses: diminished private investment, reduced innovation, capital flight, and—paradoxically—lower absolute tax receipts. Conversely, jurisdictions that combine moderate tax burdens with streamlined regulation and targeted R&D incentives generate a productivity dividend that expands the fiscal base more rapidly than high-rate alternatives. We further show that Brazil’s fiscal architecture exemplifies the high-tax, low-return trap, consuming 32–34% of GDP while ranking last among comparable economies in welfare return. We conclude that the optimal fiscal strategy is neither zero taxation nor confiscatory extraction, but a calibrated regime designed to maximise the size of the economic base—thereby aligning fiscal sustainability with long-term growth and social welfare objectives.