Difference between revisions of "Laffer curve"
Ymmotrojam (talk | contribs) m (Reverted edits by Factchecker123 (Talk); changed back to last version by Jaques) |
(edit) |
||
| Line 3: | Line 3: | ||
If the tax rate is higher than t* in the Laffer curve below, then increasing taxes causes government revenue to decrease. Few dispute the underlying principle of the Laffer curve, but the debate centers on where to set the tax rate to obtain the maximum revenue. | If the tax rate is higher than t* in the Laffer curve below, then increasing taxes causes government revenue to decrease. Few dispute the underlying principle of the Laffer curve, but the debate centers on where to set the tax rate to obtain the maximum revenue. | ||
| + | In the Reagan era, the Laffer Curve demonstrated that tax cuts lead to a near doubling of federal tax reciepts ($500 billion to $900 billion). <ref>[http://www.cato.org/pubs/pas/pa-261.html Supply Tax Cuts and the Truth About he Reagan Economic Record], by William A. Niskanen and Stephen Moore, Cato Policy Analysis No. 261 October 22, 1996.<ref> | ||
<center> | <center> | ||
| Line 11: | Line 12: | ||
[[Image:Laffer_curve.jpg]] | [[Image:Laffer_curve.jpg]] | ||
</center> | </center> | ||
| + | |||
| + | ==References== | ||
| + | <references/> | ||
[[category:economics]] | [[category:economics]] | ||
Revision as of 20:12, July 15, 2007
The Laffer curve illustrates that increasing tax rates may decrease government revenue as people stop working, and increasing tax rates towards 100% causes government revenue to decline to zero as everyone stops working. Government revenue is not always increased by increasing taxes. This curve is named after Arthur Laffer, an influential economist behind the tax cuts of President Ronald Reagan.
If the tax rate is higher than t* in the Laffer curve below, then increasing taxes causes government revenue to decrease. Few dispute the underlying principle of the Laffer curve, but the debate centers on where to set the tax rate to obtain the maximum revenue.
In the Reagan era, the Laffer Curve demonstrated that tax cuts lead to a near doubling of federal tax reciepts ($500 billion to $900 billion). <ref>Supply Tax Cuts and the Truth About he Reagan Economic Record, by William A. Niskanen and Stephen Moore, Cato Policy Analysis No. 261 October 22, 1996.<ref>
Laffer curve
