Chart of the Day: Tax More/Less Get Less/More

Today’s Chart of the Day highlights The Laffer Curve, an economic theory created by Arthur Laffer in 1974. It proposes that there is a maximum amount that tax rates can reach before tax revenues start to decline. There is not an empirical number that is agreed upon by everyone; however, there is a concept that the more you tax, the less people are incentivized to work or take risks and therefore do less resulting in less taxes overall.

The theory incorporates a concept called "diminishing returns" which can be carried into other areas as well. For example, "Is there a price too high to sell a soda during an event?" Soda sold at $1 may sell 100 units for $100 in profit. Increase the price to $5 and you may only sell 10 making only $50 in profit. Increase it to $20 you may not sell any.

As a community bank, we are actively seeking ways to enrich the lives of our customers and our communities. We seek to share this solely for informational purposes and this information is not a substitute for legal or tax advice. Crews Bank & Trust and its representatives are unable to provide legal or tax advice. Please consult an appropriate advisor regarding any legal or tax consequences.