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In economics, the Laffer curve illustrates a theoretical relationship between rates of taxation and the resulting levels of government revenue.
It illustrates the concept of taxable income elasticity—i.e., taxable income changes in response to changes in the rate of taxation.
There are historical precedents other than those cited directly by Laffer.
A 1981 article published in the Journal of Political Economy presented a model integrating empirical data that indicated that the point of maximum tax revenue in Sweden in the 1970s would have been 70%.
A 2011 paper by Trabandt and Uhlig published in the Journal of Monetary Economics presented a model that predicted that the US and most European economies were on the left of the Laffer curve (in other words, that raising taxes would raise further revenue).
However, the shape of the curve is uncertain and disputed among economists.
One implication of the Laffer curve is that increasing tax rates beyond a certain point is counter-productive for raising further tax revenue.
In 2005, the United States Congressional Budget Office (CBO) released a paper called "Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates'.
This paper considered the impact of a stylized reduction of 10% in the then existing marginal rate of federal income tax in the US (for example, if those facing a 25% marginal federal income tax rate had it lowered to 22.5%).
A 2010 study performed by the Obama administration's chief economic advisor, Christina D. Romer, showed that the maximum amount of revenue is achieved with a 50% tax rate in the long run.
The study, "The Macroeconomic Effects of Tax Changes," was published in the American Economic Review and demonstrated that increasing rates beyond this level reduce GDP, reduce tax compliance, and yield less revenue.
In other words, deficits would increase by nearly the same amount as the tax cut in the first five years, with limited feedback revenue thereafter.Tags: Adult Dating, affair dating, sex dating