The Laffer curve indicates that
A) when tax rates are low, a decrease in tax rates is likely to increase tax revenues.
B) when tax rates are high, an increase in tax rates is likely to a decrease in tax revenues.
C) tax revenue will always increase when tax rates are increased.
D) tax revenue will always decrease when tax rates are lowered.

Question

Quizplus · Accepted Answer

The Laffer curve suggests that there is an optimal tax rate that maximizes revenue. Beyond this rate, increasing taxes can lead to a decrease in revenue due to decreased economic activity.

The Laffer Curve Indicates That