Laffer Curve

Definition

A curve which supposes that for a given economy there is an optimal income tax level to maximize tax revenues. If the income tax level is set below this level, raising taxes will increase tax revenue. And if the income tax level is set above this level, then lowering taxes will increase tax revenue. Although the theory claims that there is a single maximum and that the further you move in either direction from this point the lower the revenues will be, in reality this is only an approximation.

Use Laffer Curve in a sentence

You should try and use the laffer curve to decide if there are any new ways to help improve your business.

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The laffer curve was something important for us to pay attention to because it focused on our income tax and everything.

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While everyone thought the taxes were reasonable, the laffer curve actually stated that tax revenues would be maximized if they lowered the rate by 25bp.

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