Tax at 0% and collect nothing; tax at 100% and collect nothing either. Between lies a revenue-maximizing rate — the idea at the center of decades of tax debate.
Laffer CurveLive
tax rate vs revenue
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At a 0% tax rate the government collects nothing; at 100% no one bothers to earn taxable income, so it also collects nothing. Somewhere between lies a revenue-maximizing rate — the peak of the Laffer curve. How responsive people are to taxes (the elasticity) sets where that peak falls. It is descriptive, not a policy prescription.
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How it works
The Laffer curve captures a simple truth: raising tax rates increases revenue only up to a point, because higher rates shrink the taxable base as people work, invest, or report less. The peak — the revenue-maximizing rate — depends on how strongly behavior responds to taxation. It describes the trade-off; it does not by itself prescribe policy.
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