How do we know the tax burden is too high?

Today I am going to make myself even more unpopular than I usually am and question one of the basic tenets of modern conservatism - That lower tax rates equal a societal good. I have my opinion on this issue but I would like to hear other people express their's and explain why.

In the United States we use a relatively progressive income tax system to apportion the tax burden. This type of system was first described by Adam Smith in his book Wealth of Nations:

The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhapjavascript:void(0)
Publish Posts, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.

and it's purpose is to my equitably divide the cost of government services among the beneficiaries among such services. The vast majority of economists surveyed agree that the progressive tax is the fairest and most effective tax that can be levied. (There may be a selection bias there as the voting ratio among those surveyed was 2.5 to 1 in favor of democrats).

There are a lot of arguments for and against a progressive income tax but now that we have covered a little background I just want to talk about the rate. How do we know it is too high, assuming that all services currently supplied by the government are necessary (which I don't really consider to be true but it makes the discussion easier)?

Here is how I look at it - The Laffer curve says that at an optimal taxation point tax revenues will be maximized. If taxes are too high the revenue collected will decrease and when they are cut it will increase. If they are too low revenues will decrease and when taxes are raised they will increase. On the face of it this appears to have been borne out in practice, in that all the tax cuts since 1921 have increased tax revenue.

That however may not be the whole picture, and this is why I am asking my question. Historically tax revenue as a percentage of GDP has remained steady at about 19.5% since 1950. The US treasury also released a study that found the 1986 tax cuts caused a loss of revenue of up to 3% of GDP that has never been made up.

So where is the correct balance? And what is the proper way to determine it?