Laffer Curve Flashcards
What does Laffer curve explain
a moment where you lower tax percentage you can get more tax revenue because companies will pay less taxes and have extra money-> company with extra money use it to invest in the company -> more labor will be hired -> they will pay taxes too-> government will collect more taxes because everyone will be employed
what’s its effectiveness
its effectiveness is to increase GDP
lowering tax percentage actually increase tax revenue?
no because companies did not use the extra money for investments; they used it for personal use increasing consumption which helped the economy BUT caused total deficits causing national debt
What could they do to improve it?
-should have said “if you want this tax break you have to invest in your buisness”
-tax credit : you do something and we give you a break against your taxes
-some may say the curve was miscalculated
