both a high and low tax rate can produce the same revenues
Explained: if there was a 0% tax rate, there would be no tax revenue and if there was a 100% tax rate, no one would work and therefore there would be no tax revenue.
Answer:
The correct answer is letter "D": both a high and low tax rate can produce the same revenues.
Explanation:
Named after American economist Arthur Laffer (born in 1940), the Laffer curve is a graph that shows how changes in tax rates can influence economic growth. The theory states that lower tax rates encourage additional output and increase income which builds bigger tax bases. Though, if described in an XY-axis graph, in the case the tax rate increases from zero (0), the tax revenue will increase as well until it reaches a point where the growth will downturn.
In that case, both the decrease and increase of the tax rates can produce similar impacts on tax revenues.
