In economics, the laffer curve illustrates a theoretical relationship between rates of taxation and the resulting levels of the governments tax revenue. The laffer curve is a theory developed by supplyside economist arthur laffer to show the relationship between tax rates and the amount of tax revenue collected by governments. Laffer is best known for the laffer curve, an illustration of the concept that there exists some tax rate between 0% and 100% that will result in maximum tax revenue for. The laffer curve assumes that no tax revenue is raised at the extreme tax rates of 0% and 100%, and that there is a tax rate between 0% and 100% that maximizes government tax revenue. It is found that while the labor tax rate is smaller than that at the peak of the laffer curve, the. Where the marginal tax rate is measured on the vertical axis and total tax revenues are measured on the horizontal axis. A copy of the license is included in the section entitled gnu free documentation license. Pdf this article explores the laffer curve of the personal income tax using a microeconomic approach.
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