According to the Laffer curve, increases in the tax rate will lead to a(n)
A) steady decrease in tax revenues.
B) steady increase in tax revenues.
C) initial decrease in tax revenues and then an increase in tax revenues.
D) initial increase in tax revenues and then a decrease in tax revenues.

Question

Quizplus · Accepted Answer

The Laffer curve illustrates that there is a point at which increasing tax rates will actually lead to a decrease in tax revenues, as higher taxes can discourage work, investment, and production, leading to a decrease in the taxable base.

According to the Laffer Curve, Increases in the Tax Rate