Arther Laffer is best known for the Laffer Curve, an illustration of the theory that there exists some tax rate between 0% and 100% that will result in maximum tax revenue for governments.
He explains how there are two effects tax rates have on revenues:
- The amount of tax you collect per dollar of tax base
- The economic effect of reducing the tax base by raising taxes
These two effects always work in opposition to each other. For example, A business can increase prices but will end up selling fewer widgets (like the “reducing tax base” side of the Laffer Curve) and a business can cut prices so low that they sell tons of widgets but lose money in the process (similar to the tax collected per dollar).
The Laffer Curve “relates tax rates to total revenues”, says Laffer in this exclusive interview by Doug Goldstein.
You can find more about Arthur at LafferCenter.com
Mr. Laffer’s books:
An Inquiry into the Nature and Causes of the Wealth of States: How Taxes, Energy and Worker Freedom Change Everything
More books by Arthur Laffer on Amazon.com
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