According to the Laffer curve,
A) an increase in tax rates will always cause tax revenues to increase.
B) when marginal tax rates are high, an increase in tax rates is likely to cause tax revenues to increase.
C) when marginal taxes are low, an increase in tax rates will probably cause tax revenues to decline.
D) when marginal tax rates are high, a reduction in tax rates may increase tax revenue.

Question

Quizplus · Accepted Answer

The Laffer curve suggests that there is an optimal tax rate that maximizes revenue. When tax rates are too high, reducing them can incentivize economic activity and potentially increase total tax revenue.

According to the Laffer Curve