The Laffer Curve: How You Can LOWER Taxes and RAISE Revenues
August 14, 2020
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3:26Now PlayingThe Laffer Curve: How You Can LOWER Taxes and RAISE Revenues
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as posted by the channelDr Madsen Pirie of the Adam Smith Institute explains how the economist Arthur Laffer, 80 years old on August 14th, unveiled two obvious facts. If you plot a graph with the rate of tax along the horizontal axis, and revenue raised along with the vertical one, then with a zero rate of tax, zero revenue will be yielded. Similarly, if the tax rate is 100 per cent, zero revenue will be raised because the effort would be futile if you gained nothing from it.
Between the zero revenue raised at nought per cent, and the zero raised at 100 per cent, there will be a line. This is the famous Laffer Curve. That curve will have a maximum point, the level of tax that raises the most revenue. Empirical studies indicate that UK top tax levels are already above that maximum point, so that raising them would reduce revenue, rather than increase it. Furthermore, they suggest that if we reduce the top rate, we would raise more revenue by doing so.
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