The _____ shows that when incentives to work and produce are hampered by a high federal marginal income tax, reducing the marginal tax might actually increase total tax revenue.

Question

Quizplus · Accepted Answer

The Laffer curve shows the relationship between tax rates and tax revenue. It suggests that there is an optimal tax rate that would generate the most revenue, and that high tax rates beyond this point would actually reduce revenue by discouraging work and investment. By reducing the marginal tax rate, individuals and businesses have greater incentive to work and produce, potentially increasing total tax revenue.

The _____ Shows That When Incentives to Work and Produce