Fiscal
Laffer Curve
Definition
The theoretical relationship between tax rates and tax revenue — suggesting that beyond a certain point, higher rates actually reduce revenue by discouraging economic activity.
Explanation
Popularized during Reagan-era tax debates. At 0% tax rate, revenue is zero. At 100%, nobody works, so revenue is also zero. The optimal revenue-maximizing rate is debated — estimates range from 50-70% for top income tax rates. Used to justify tax cuts, though the US has rarely been on the "wrong side" of the curve.