March 27th, 2012

What is a Laffer Curve?

Graphical representation of a conceptual relationship between marginal tax rates and total tax collections. Named after the US economics professor Arthur Laffer who proposed that lower taxes encourage additional output (supply) and thus increase aggregate income. Laffer curve is used by the supporters of supply side economics to back their claim that low income tax policies spur non-inflationary growth by encouraging new investment.