The Laffer curve depicts the relationship between the government's tax revenue and tax rate. When the tax rate is below a certain limit, raising the tax rate can increase the government's tax revenue. If the tax rate exceeds this limit, the higher the tax rate, the lower the government's tax revenue.
Generally, the increase of tax rate can increase the government's tax revenue. However, when the tax rate increases beyond a certain limit, the enterprise's operating cost increases, investment decreases, and income decreases, that is, the tax base decreases, which leads to the reduction of the government's tax revenue. This relationship between tax revenue and tax rate is called Laffer curve.
The Laffer curve reflects the relationship between economy and tax revenue: the higher the tax rate, the more economic growth will be inhibited, the tax base will be reduced, and the tax revenue will decline. On the contrary, the lower the tax rate, the economic growth can be stimulated, and the tax base can be expanded, and the tax revenue will increase.
?
What is a Laffer curve
Laffer curve: For example, the original tax rate for the state is 8%, but now the state increases the tax rate by 10%.
The increase of tax rate will increase the national tax revenue. The increase of tax rate will definitely increase tax revenue (wrong). The reason is that American economist Ralph studied the relationship between tax rate and tax revenue, forming a Ralph curve. If the tax rate is increased from 8% to 10%, and 2% more tax is paid each month, individuals can bear it and will pay taxes to the state; However, if the tax rate is increased from 8% to 80%, individuals can't afford it at this time. Because they can't pay the tax, individuals may choose to resign. The same is true for enterprises. After paying 80% tax, enterprises will also
In case of bankruptcy, the state will not collect taxes, so the tax rate will not necessarily increase if the tax rate is increased. When the tax rate is higher than a point, it will not
Increase, but decrease. The Laffer curve has a peak value, which is a curve that rises first and then falls. The peak value is the critical point
The tax revenue will increase with the increase of tax rate. If the tax rate is too high, the tax revenue will not increase, but will decline. As in ancient times.
Peasant uprisings broke out in every dynasty, largely because the state imposed exorbitant taxes and levies, which made people unable to live
Righteousness. Guan Zi also put forward that "people should be selected with moderation (people should pay attention to the limit when taking things from people, and adhere to the principle of moderation)".
If people are exploited too harshly, they won't do it.
What is a Laffer curve? Briefly describe the economic principles it contains
Laffer curve: The theory of Laffer curve was developed by Arthur E? Laffer proposed. In general, the higher the tax rate, the more the government's tax revenue. But when the tax rate increases beyond a certain limit, the enterprise's operating costs increase, investment decreases, and income decreases, that is, the tax base decreases, but the government's tax revenue decreases. The curve describing the relationship between tax and tax rate is called the Laffer curve. significance:
(1) This shows that high tax rates do not necessarily promote economic growth and achieve high income, and high income does not necessarily require high tax rates. Because high tax rates will weaken the vitality of economic entities, leading to economic stagnation or decline, high tax rates also often bring too many exemptions and preferences.
(2) It also shows that for the same reason, two different tax rates can be applied to the same amount of income.
(3) Although the optimal combination of tax rate, tax revenue and economic growth is rare in practice, the curve proves to be possible in theory.
How to understand Laffer curve theory?
Laffer curve is a tax theory put forward by Laffer in 1974. He believes that there is a close relationship between tax rates, taxes and productivity. Suppose we tax gasoline. When there is no tax, there are many people driving, and the consumption of gasoline is also large. If gasoline is taxed, its price will rise and its demand will decrease. At first, the rate of purchase decrease was less than the rate of tax increase, and tax increase. However, when the reduction rate of demand is greater than the increase rate of tax revenue, tax revenue will be reduced. People will use all kinds of ways to use less gasoline. The tax rate increases, but the tax base decreases, so does the tax revenue.
It can be seen from this that whether the tax rate increases or the tax rate decreases increases depends on where in the Laffer curve.
