Which of the following best describes the policy implications of a Laffer curve?

Question

Quizplus · Accepted Answer

The Laffer Curve suggests that there is an optimal tax rate that maximizes government revenue, and beyond that point, increasing taxes actually decreases revenue due to disincentives for work and investment. Therefore, policy makers should carefully consider whether a given increase in tax rates would increase or decrease tax revenues. It is not advisable to eliminate tax deductions or loopholes without careful consideration of their impact on revenue. It is also not advisable to set the tax rate as low as possible, as this may not necessarily maximize revenue. The Laffer Curve does suggest that high taxes on income may decrease the work incentive, but this is not the most relevant policy implication.

Which of the Following Best Describes the Policy Implications of a Laffer