Asked by Karla Rosas on Jun 07, 2024
Verified
The Laffer curve is based upon the idea that
A) the higher the tax rate the greater the tax receipts.
B) high tax rates may yield less tax revenue than lower tax rates.
C) the lower the tax rate the greater the tax receipts.
D) income taxes are inefficient because tax reform has made it more difficult to legally avoid taxation.
E) Income taxes are a poor source of federal tax revenue.
Laffer Curve
An economic theory suggesting there exists an optimal tax rate that maximizes government revenue without discouraging people from working or investing.
Tax Rate
The percentage at which an individual or corporation is taxed.
Tax Receipts
The revenue collected by the government through all forms of taxes, such as income tax, corporate tax, and sales tax.
- Examine the Laffer curve and its consequences for fiscal policy and state income.
Verified Answer
ZK
Zybrea KnightJun 07, 2024
Final Answer :
B
Explanation :
The Laffer curve suggests that there is an optimal tax rate at which tax revenue is maximized, beyond which increasing tax rates will actually result in a decrease in tax revenue. Therefore, high tax rates may yield less tax revenue than lower tax rates.
Learning Objectives
- Examine the Laffer curve and its consequences for fiscal policy and state income.