As the size of the tax increases, tax revenue will always increase.

Question

Quizplus · Accepted Answer

This is not always true. At a certain point, increasing taxes can lead to a decrease in taxable activities such as investment, production, or consumption, ultimately resulting in lower tax revenue. This is known as the Laffer curve. The optimal tax rate for maximizing revenue depends on various factors such as the elasticity of demand for the taxed good or service and the behavior of taxpayers.

As the Size of the Tax Increases, Tax Revenue Will