The Laffer curve illustrates the concept that
A) an increase in marginal tax rates will always cause tax revenues to increase.
B) an increase in marginal tax rates will always cause tax revenues to decrease.
C) when marginal tax rates are quite high, a decrease in the tax rate may cause tax revenues to increase.
D) when marginal taxes are quite low, an increase in the tax rate will probably cause tax revenues to decline.

Question

Quizplus · Accepted Answer

The Laffer curve suggests that there is an optimal tax rate that maximizes revenue. Beyond this point, higher tax rates can discourage work and investment, leading to lower tax revenues.

The Laffer Curve Illustrates the Concept That