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Laffer Curve

The Laffer Curve is a schedule showing the relationship between tax rates and tax revenues.

Expanded Definition

The Laffer Curve was developed by Arthur Laffer. The Laffer Curve suggests that at a certain tax rate level tax revenues are maximized at a 100 percent. A 100 percent tax rate would yield 0 tax revenue as well as a 0 percent tax rate. So, as tax rates increase above zero, tax revenues begin to increase until they start falling to zero.

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