Which of the following ideas is the most plausible?
A)Tax revenue is more likely to increase when a low tax rate is increased than when a high tax rate is increased.
B)Tax revenue is less likely to increase when a low tax rate is increased than when a high tax rate is increased.
C)Tax revenue is likely to increase by the same amount when a low tax rate is increased and when a high tax rate is increased.
D)Decreasing a tax rate can never increase tax revenue.

Question

Quizplus · Accepted Answer

This idea is based on the Laffer curve, which suggests that there is an optimal tax rate that maximizes government revenue. When tax rates are already high, increasing them further can lead to decreased economic activity, which lowers tax revenue. However, when tax rates are low, an increase in tax rate may inspire businesses to work harder to make more taxable income, increasing tax revenue.

Which of the Following Ideas Is the Most Plausible