




The Laffer Curve is a mathematical shape that shows the relationship between tax rates and the revenue governments collect from those taxes. The Laffer Curve is shaped like an upside down U. The Laffer Curve is not fixed, however. The Laffer Curve shows that as tax rates rise, tax revenues increase. They reach a critical high point, called T*, where the maximum amount of tax revenue is reached for the maximum tax rates possible. After this point, both tax rates and revenue drop. The T* location suggests that at this point, people become increasingly unwilling to pay taxes. The location of the T* point along the Laffer Curve varies according to economic conditions. Economist Arthur Laffer invented the Laffer Curve.
Rate this Laffer Curve definition...




Where is the market headed? The answer may surprise you. Find out with the exclusive & Barron's recommended charts of Chart of the Day. 

Popular Terms: labor relations, balance sheet, VIX, implied volatility, current ratio, reverse mortgage, risk management, minority interest, option premium, inflation, EBITDA, average price per share, exdividend date, annual return, 144a, whollyowned subsidiary, irrevocable trust, Key Rate Duration, APR, stock split, debt service coverage, deferred tax, 1031 exchange, LIBOR, real GDP, Zero Cost Collar, liquidity ratio, 1035 exchange, FTSE, phantom income, covered put, in escrow, stock market close, per diem, margin rate, open position, quality assurance, dividends payable, deferred revenue, required rate of return, FICO score, retained earnings, diluted share, 401a, class C shares, exdividend, command economy, limit order, cancelled check


 