Exactly. Case in point:
After Canada raised its tax on cigarettes sharply, it became so highly profitable to smuggle cigarettes into the country that tax revenues dropped. The high tax promoted smuggling and the government lost all the taxes on the smuggled cigarettes.
As soon as Canada lowered its tax on cigarettes, bootlegging dropped and tax revenues increased.
http://www2.potsdam.edu/hansondj/Controversies/20080227114336.html
Russia under Putin:
He cut taxes, and cut into the revenues of the Russian Mafia. Increased government Revenues.
Funny, Russia has Ronald Reagan’s tax system (actually, Steve Forbes, it’s a flat tax), America has Karl Marx’s tax system.