The Laffer curve indicates that income tax collections:
A)will be very low if income tax rates are very low
B)will be very low if income tax rates are very high
C)will be at a maximum if income tax rates are at some intermediate level between very low and very high
D)all of the above are correct

Question

Quizplus · Accepted Answer

The Laffer curve illustrates that tax revenue will be low at both very low and very high tax rates, and at an intermediate rate, tax revenue can be maximized. This is because at very high tax rates, incentives to earn taxable income decrease, leading to lower revenue, while at very low rates, the government doesn't collect much revenue despite potentially high economic activity.

The Laffer Curve Indicates That Income Tax Collections