During the Reagan administration, the Laffer curve was used to argue that:
A) the supply-side effects of tax cuts are relatively small.
B) discretionary tax cuts are unwise because they create stagflation.
C) lower income tax rates could increase tax revenues.
D) a "flat tax" would simplify the tax code and stimulate economic growth.

Question

Quizplus · Accepted Answer

The Laffer curve suggests that there is an optimal tax rate that maximizes government revenue, and that beyond that rate, higher taxes actually reduce revenue because they discourage economic activity. The Reagan administration used this theory to argue that lower income tax rates could generate higher tax revenues by stimulating economic growth. This became a key component of Reagan's economic policy and was often cited as the rationale for his tax cuts.

During the Reagan Administration, the Laffer Curve Was Used to Argue