The Laffer Curve

In economics, the Laffer curve is used to illustrate the idea that increases in the rate of taxation do not necessarily increase tax revenue.1

Interesting stuff. Take the extreme case: If I make $50,000 and pay 0% in taxes, I’m probably pretty motivated to keep working. If I make $50,000 and pay 100% in taxes, there’s obviously no reason for me to keep working — I quit my job and the government loses money.

The theory is that the most likely outcome of a variety of tax rates is somewhat of a bell curve and that there is a point at which increasing taxes causes a behavior change that results in decreased federal revenues.

The Laffer Curve, Part I: Understanding the Theory2

The Laffer Curve, Part II: Reviewing the Evidence3

The Laffer Curve, Part III: Dynamic Scoring4


Posted in miscellaneous.

Leave a Reply

Your email address will not be published. Required fields are marked *