The larger the wealth effect, the less likely it is that a wage tax will give rise to a Laffer curve that has a downward sloping portion.

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The wealth effect refers to the increase in spending that occurs when individuals feel wealthier due to an increase in the value of their assets, such as stocks or real estate. If the wealth effect is large, it means that people are more likely to continue spending even if their wages are taxed. This reduces the likelihood of a Laffer curve that has a downward sloping portion, as there will still be a significant amount of revenue generated even with higher tax rates.

The Larger the Wealth Effect, the Less Likely It Is