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Economics

The Laffer Curve and Tax Revenue Optimization

Quick fact

The Laffer Curve was famously sketched by economist Arthur Laffer on a napkin in 1974 to illustrate that both a 0% and a 100% tax rate would yield zero revenue, implying the existence of a revenue-maximizing rate in between.

Why this is interesting

If the government doubled the tax rate, would it double its revenue? Would you work harder or find ways to avoid the tax? The answer isn't as simple as it seems.