Laffer Curve

**higher the tax rate you set, less $ you will collect
**Laffer Curve is controversial and debatable


*trade-off b/t tax rates and govt revenue
*as tax rates ↑ from 0, tax revenues ↑ from 0 to some max level, and then decline
*higher tax rates, less $ you collect
*Criticisms:

1. where economy is located on curve, it is difficult to determine
2. tax cuts also ↑ demand which can fuel inflation
3. empirical evidence suggests that impact on tax rates on incentives to work, save, and invest are small