So... if it's "not true", what sort of curve would you get if you plot government revenue as a function of tax rates? The Laffer curve makes a lot of sense. What is difficult about it, and where politicians are likely to try and push their own agenda, is finding where revenues are maximized, which is a far more difficult proposition than proposing that there is a revenue curve with a high point somewhere in the middle, which makes intuitive sense.
"Taxes shouldn't be too high, and shouldn't be too low" is about the most precise statement anyone can make about the Laffer curve and still be able to have it hold up in the face of the real world.
Well, given that plenty of governments seem to think taxation can be increased indefitely in order to support their "client state" of government employees, I'd say that was a valuable result.
That's a believable number. But I also imagine that the curve flattens considerably before topping out: Sweden probably wouldn't get a lot of additional revenue out of that last 5-10% in tax rates. If you were picking the "right" level of taxation, you'd presumably want it to set it somewhere near the point where the economic cost of the taxes was equal to the benefits of the government's use of the revenue, and not at the point of maximum revenue.
A 70% marginal rate is not outrageously far from where the top bracket in California will be if Washington decides the best Social Security reform includes lifting the payroll tax cap. Today's effective top marginal rate in CA is ~52% in Fed+State income taxes and another 3.8% for the high-earner Medicare tax. If SS goes uncapped, adding another 12.4%, your $1M earner is hitting 68.2%. I'm dispensing with the accounting fantasy that the "employer-paid" portion of the tax isn't actually a tax on the worker.
According to the Wikipedia page some studies indicate that the maximum for the laffer curve in Sweden was about 70% tax.
On the other hand, the introduction of a 50% income tax rate in the UK didn't work very well[1]. It caused more than £10B of income to be shifted to an earlier year, and in the end raised only a modest fraction of the predicted extra tax revenues. It looks like a few people in government failed to notice that almost everyone who has enough income to pay that kind of tax rate in the first place also has the ability to choose when they formally realize that income, and many of the wealthiest also have the ability to choose where they formally receive the income as well.
The newish top tax rate here is coming down to 45% in April 2013, after the new government finished figuring out how much of a poison chalice they had been left by the previous one. Unfortunately, this causes problems of its own, as they are now predicting a multi-billion pound shortfall in tax revenues for 2012-2013 as wealthy folk do the opposite and defer their income to take advantage of the reduced rate. Obviously they're hoping that greater tax revenues in later years will make up for that.
Worse than these individual disruptions over a relatively short period, though, is the fact that successive governments have made it very clear that they can and will mess around significantly with tax rates for high earners, which in turn creates an incentive for any big earner to talk to tax experts and either take part in legal tax avoidance schemes or at least minimise how much income they wind up with on paper in any given year until they're convinced that it's the most tax-efficient time for a while to take it and then grab the lot at (what they hope will be) a minimum rate.
At least we're not in France, where the government seem to think they can slap a 75% tax rate on the wealthy and not suffer horrendous consequences to their already business-hostile economic and political landscape...
Even if the Laffer curve is true (see the comment by wavefunction) no one knows where the maximum revenue point is. Look at "Empirical data" in the Wikipedia article: There are many possible values for "optimal tax rate" and companies have many options to play the system, e.g. always hold back enough money that there is justification for a lower tax rate.
No, nobody knows what the exact shape of the curve is, but governments should bear in mind when screwing more cash out of companies and people in order to fund pork barrell projects.
http://en.wikipedia.org/wiki/Laffer_curve