Laffer curve

is, as the fundamental idea of supply-side economics, the insight that government tax revenue are at zero both in the case of a 0% tax rate and at a 100% tax rate. Therefore, tax rate and tax revenue needs to be brought into harmony.

The Laffer curve embodies a tenet of supply-side economics: that government tax revenues are the same (nil) at 100% tax rates as they are at 0% tax rates and that there is a tax rate at which maximal revenue is generated somewhere in between these two values. The supply-siders were influenced strongly by the idea of the Laffer curve, which states that tax rates and tax revenues were distinct and that when tax rates are either too high or too low, less than maximum tax revenues will result. Supply-siders felt that in a high tax rate environment, lowering tax rates will result in either increased revenues or smaller revenue losses than one would expect relying only on static estimates of the previous tax base.

laffer curve, n.All

laffer curve