Laffer curve
E79881
The Laffer curve is an economic theory that illustrates the relationship between tax rates and government revenue, suggesting that beyond a certain point higher tax rates reduce total revenue by discouraging work and investment.
Statements (47)
| Predicate | Object |
|---|---|
| instanceOf |
concept in public finance
→
economic theory → |
| appliesTo |
capital gains taxes
→
corporate taxes → income taxes → other distortionary taxes → |
| associatedWith |
supply-side economics
→
tax cuts debate → |
| assumes |
tax rates influence size of the tax base
→
taxpayers adjust behavior in response to tax rate changes → |
| coreIdea |
beyond some point higher tax rates can reduce total tax revenue
→
both very low and very high tax rates can yield low tax revenue → high tax rates may discourage work, saving, and investment → tax policy affects economic behavior and the tax base → there exists a tax rate that maximizes government revenue → |
| criticizedFor |
being oversimplified representation of complex tax responses
→
lack of precise empirical determination of the revenue-maximizing tax rate → |
| dependsOn |
behavioral responses to taxation
→
elasticity of capital supply → elasticity of labor supply → |
| describes |
relationship between tax rates and tax revenue
→
|
| endpointProperty |
at 0% tax rate, government revenue is zero
→
at 100% tax rate, government revenue is assumed to be near zero → |
| field |
economics
→
public finance → taxation → |
| graphicalRepresentation |
curve on a two-dimensional tax rate–revenue diagram
→
|
| hasShape |
inverted U-shaped curve
→
|
| horizontalAxis |
tax rate
→
|
| implies |
there is a revenue-maximizing tax rate between 0% and 100%
→
|
| influenced |
conservative economic policy discourse in the United States
→
debates on top marginal income tax rates → |
| mathematicalNature |
qualitative relationship rather than a fixed functional form
→
|
| namedAfter |
Arthur Laffer
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|
| originatedBy |
Arthur Laffer
→
|
| policyRelevance |
used to argue for lower marginal tax rates in some contexts
→
used to evaluate effects of tax rate changes on revenue → |
| popularizedIn |
Reagan-era tax policy discussions
→
United States economic policy debates of the 1970s → |
| relatedConcept |
deadweight loss of taxation
→
marginal tax rate → optimal taxation → supply-side tax policy → tax base elasticity → |
| usedInArgument |
claim that cutting high tax rates can increase revenue
→
claim that raising already high tax rates may reduce revenue → |
| verticalAxis |
tax revenue
→
|
Referenced by (3)
| Subject (surface form when different) | Predicate |
|---|---|
|
Reaganomics
→
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influencedBy |
|
Arthur Laffer
→
|
notableFor |
|
Arthur Laffer
→
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theoryDeveloped |