Laffer Curve


Laffer Curve
Invented by Arthur Laffer, this curve shows the relationship between tax rates and tax revenue collected by governments. The chart below shows the Laffer Curve:

Laffer Curve

The curve suggests that, as taxes increase from low levels, tax revenue collected by the government also increases. It also shows that tax rates increasing after a certain point (T*) would cause people not to work as hard or not at all, thereby reducing tax revenue. Eventually, if tax rates reached 100% (the far right of the curve), then all people would choose not to work because everything they earned would go to the government.

Governments would like to be at point T*, because it is the point at which the government collects maximum amount of tax revenue while people continue to work hard.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Laffer Curve — ☆ Laffer Curve [laf′ər ] n. [after A. Laffer (1940 ), U.S. economist, its originator] [also L c ] a graph illustrating a theory which maintains that increasing tax rates beyond a certain point causes a reduction in government revenues by… …   English World dictionary

  • Laffer curve — In economics, the Laffer curve is used to illustrate the idea that increases in the rate of taxation may sometimes decrease tax revenue. Since a 100 percent income tax will generate no revenue (as citizens will have no incentive to work), the… …   Wikipedia

  • Laffer curve — A curve conjecturing that economic output will increase if marginal tax rates are cut. Named after economist Arthur Laffer. Bloomberg Financial Dictionary * * * Laffer curve Laf‧fer curve [ˈlæfə ˌkɜːv ǁ fər ˌkɜːrv] noun ECONOMICS the idea… …   Financial and business terms

  • Laffer curve — /laf euhr/, Econ. a relationship postulated between tax rates and tax receipts indicating that rates above a certain level actually produce less revenue because they discourage taxable endeavors and vice versa. [1975 80; named after Arthur Laffer …   Universalium

  • Laffer curve — [ lafə] noun Economics a supposed relationship between economic activity and the rate of taxation which suggests that there is an optimum tax rate which maximizes revenue. Origin 1970s: named after the American economist Arthur Laffer …   English new terms dictionary

  • Laffer Curve — /ˈlæfə kɜv/ (say lafuh kerv) noun a theory which states that above a certain point tax rates produce less revenue rather than more because they discourage taxable activities, and vice versa. {named after Arthur Laffer, born 1940, US economist who …   Australian English dictionary

  • laffer curve —  1980s economic idea, espoused by Arthur Laffer, suggesting that lowering marginal tax rates stimulates increases in output thereby increasing government tax revenue.  See also supplyside economics, dynamic scoring …   American business jargon

  • Laffer curve — / læfə kɜ:v/ noun a chart showing that cuts in tax rates increase output in the economy. Alternatively, increases in tax rates initially produce more revenue and then less as the economy slows down …   Dictionary of banking and finance

  • Laffer curve — noun a graph purporting to show the relation between tax rates and government income; income increases as tax rates increase up to an optimum beyond which income declines • Hypernyms: ↑graph, ↑graphical record …   Useful english dictionary

  • the Laffer Curve — UK US noun [S] ► ECONOMICS, GOVERNMENT the theory that if a country s tax rates are low, the amount of money collected by the government will increase, because companies will be encouraged to invest and do business in that country: »According to… …   Financial and business terms


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