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In economics, the Laffer curve illustrates a theoretical relationship between rates of taxation and the resulting levels of the government's tax revenue. The Laffer curve assumes that no tax revenue is raised at the extreme tax rates of 0% and 100%, meaning that there is a tax rate between 0% and 100% that maximizes government tax revenue. [a ...
The original equilibrium price is $3.00 and the equilibrium quantity is 100. The government then levies a tax of $0.50 on the sellers. This leads to a new supply curve which is shifted upward by $0.50 compared to the original supply curve. The new equilibrium price will sit between $3.00 and $3.50 and the equilibrium quantity will decrease.
The collection of revenue is the most basic task of a government, as the resources released via the collection of revenue are necessary for the operation of government, provision of the common good (through the social contract in order to fulfill the public interest) and enforcement of its laws; this necessity of revenue was a major factor in ...
Tariffs have been used for a very long time in the U.S., well before federal income tax, and the federal government does benefit from tariff revenue. Tariffs also can help U.S. companies compete ...
Apart from the role in raising government revenue, indirect taxes, in the form of tariffs and import duties, are also used to regulate quantity of imports and exports flowing in and out of the country. In case of imports, by tariff imposition the government protects domestic producers from foreign producers that may have lower production costs ...
The new national government needed revenue and decided to depend upon a tax on imports with the Tariff of 1789. [28] The policy of the U.S. before 1860 was low tariffs "for revenue only" (since duties continued to fund the national government). [29] The Embargo Act of 1807 was passed by the U.S. Congress in that year in response to British ...
The government budget constraint always applies when deriving them; all tax revenue covers government purchases of goods or transfer payments. In the theory of taxation, however, the benefits of public goods associated with government spending are not taken into account; at most, cash flows back to the private sector are modeled to illustrate ...
The Laffer curve embodies a postulate of supply-side economics: that tax rates and tax revenues are distinct, with government tax revenues the same at a 100% tax rate as they are at a 0% tax rate and maximum revenue somewhere in between these two values. Supply-siders argued that in a high tax rate environment lowering tax rates would result in ...