Theory of Optimal Taxation: Making Good Cents - Academy 4SC Learning Hub
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Jan 20, 2022
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OPTIMAL TAXATION | PUBLIC ECNOMICS | LEARN OIKONOMIA
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The Laffer Curve illustrates the theoretical relationship between tax rates and government tax revenue, suggesting that revenue is zero at both 0% and 100% tax rates, with an optimal rate somewhere in between that maximizes revenue, forming an inverted U-shape. Cutting tax rates from very high levels can sometimes increase total revenue (the "normal range") by incentivizing work and investment, while raising rates from very low levels also increases revenue (the "prohibitive range"). The concept
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