The Laffer curve demonstrates that raising tax rates:

Question

Quizplus · Accepted Answer

The Laffer curve shows that as tax rates increase, tax revenue also increases up to a certain point. After this point, increasing tax rates actually leads to a decrease in tax revenue. This means that at a certain point, raising tax rates will result in fewer people being willing to work, pay taxes, or invest, which ultimately reduces the tax base and therefore tax revenue. So, raising tax rates does increase tax revenue up to a point, and then it decreases tax revenues, making option A the correct answer.

The Laffer Curve Demonstrates That Raising Tax Rates