The Laffer Curve indicates that when tax rates are high, a rate reduction may lead to an increase in tax revenue. when tax rates are low, an increase in tax rates will generally lead to a reduction in tax revenues. an increase in tax rates will always lead to an increase in tax revenues. the deadweight losses resulting from taxation are small at the tax rate that maximizes the revenues derived by the government.

The Laffer Curve indicates that when tax rates are high, a rate reduction may lead to an increase in tax revenue. when tax rates are low, an increase in tax rates will generally lead to a reduction in tax revenues. an increase in tax rates will always lead to an increase in tax revenues. the deadweight losses resulting from taxation are small at the tax rate that maximizes the revenues derived by the government.

Macroeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506756

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter12: Fiscal Policy, Incentives, And Secondary Effects

Section: Chapter Questions

Problem 11CQ

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