In a bid to be re-elected president of the United States, you promise both a lower tax rate and greater tax revenue. Would you be able to back up this promise with economic reasoning

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15-06-2022
Business

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In a bid to be re-elected president of the United States, you promise both a lower tax rate and greater tax revenue. Would you be able to back up this promise with economic reasoning

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Tundexi Tundexi · Answer 1 · 2022-07-11T10:41:43+02:00

We can backup the aim of lower tax rate and greater tax revenue by ensuring that the current tax rate is in region II of the Laffer curve.

What is the Laffer curve?

This is an economic curve that shows the relationship between rates of taxation and the result of tax revenue.

If tax rate is in region I of the Laffer curve, then, the tax revenues would decrease as the tax rate falls and one will not be able to back up your promise to voters.

However, if the tax rate is in region II of the Laffer curve, tax revenue would increase as the tax rate falls and you'd keep your promise.