Laffer Curve Explained | Public Economics | Ecoholics

The Laffer Curve is a theory formalized by supply-side economist Arthur Laffer to show the relationship between tax rates and the amount of tax revenue collected by governments. The curve is used to illustrate the argument that sometimes cutting tax rates can result in increased total tax revenue. The Laffer Curve describes the relationship between tax rates and total tax revenue, with an optimal tax rate that maximizes total government tax revenue. If taxes are too high along the Laffer Curve, then they will discourage the taxed activities, such as work and investment, enough to actually reduce total tax revenue. In this case, cutting tax rates will both stimulate economic incentives and increase tax revenue. The Laffer Curve was used as a basis for tax cuts in the 1980's with apparent success but criticized on practical grounds on the basis of its simplistic assumptions, and on economic grounds that increasing government revenue might not always be optimal. Ecoholics is the largest platform for economics. Download our app: http://ecoholics.in/mobile-app/ Visit our website for further information and resources: http://ecoholics.in/ To Subscribe for Courses - https://subscription.ecoholics.in/ Reach out to us on Whatsapp for further information: https://wa.me/917880107880 If you’re preparing for competitive exams like UPSC IES, RBI DPER or UGC NET then Ecoholics is the one-stop destination for all your learning needs. Study economics the smart way and get an in-depth understanding of this dynamic subject with our holistic approach. Our team of expert faculties help you polish your knowledge and provides you with one-on-one mentorship and doubt-clearing sessions, so you leave no stone unturned when it comes to your preparation. By signing up with us, you can access our live classes, video lectures, test series and get the hard copy of study material delivered to your doorstep, so your preparation never hits a bump! Follow our social media handles to stay updated on all things economics. Follow Ecoholics on Twitter-   / ecoholics_in   Follow Ecoholics Facebook Group -   / 41907.  . Follow Ecoholics Facebook Page -   / ecoholics8   Follow Ecoholics on Instagram:   / ecoholics.in   Follow Ecoholics on Telegram: https://t.me/ecoholicsbysanat Become a Member of Largest Community of Economics: https://ecoholics.in/become-a-member/ #economics #economic #economists #upsc #rbi #indianeconomicsservice #ias #iitjam #gateeconomics #ugcnet #ugc #jrf #economy #unionpublicservicecomission #ignou #dse #jnu #maentrance #pgentrance