Laffer Curve - Learn How Tax Rates and Tax Revenues are Related
The Laffer Curve is a theoretical explanation of the relationship between the tax rates set by the government and the tax revenue collected by the same at. This series of charts by Antony Davies illustrates the relationship income tax rate has had no effect on tax revenue as a fraction of GDP. range for some local or national economy is always associated with particularly high The idea of an inverse relationship between tax rates and revenue is not.
Economic Growth Drives the Level of Tax Revenue | Tax Foundation
Government in both places have seen revenue act independently of tax rates in some instances. In the United States through the s and s, top individual federal tax rates remained at 70 percent while revenue climbed to Following the recession in andtax revenue dropped to 24 percent, then climbed steadily throughdespite top marginal income tax rates coming down to 28 percent and the corporate rate dropping to 34 percent in Tax revenue fell in the early s before and after the Bush tax cuts, only to rise again after the Bush tax cut.
What Drives Tax Revenues? As The Economist writer implies, economic growth is a major driver of the level of tax revenues.
What's the difference between revenue and income?
In the times when tax revenues are up, the economy is doing well. We see this in each of the times when revenue fluctuates. From the mids through the late s the economy grew steadily and tax revenues grew along with it.
Conversely, between andtotal tax revenue in the U. The short answer to how we maximize tax revenue: We can do this by limiting taxes on economic factors that drive economic growth, namely investment. This means reducing tax rates on businesses, limiting the double taxation of investment created by taxing corporate income at both the entity level corporate tax and the shareholder level capitals gains and dividend taxesand moving toward full expensing which would allow businesses to account for all their costs.Tax Revenue and Deadweight Loss
In the long-term, both cutting the corporate tax rate to 25 percent and moving to full expensing would lead to increased total federal tax revenue in the long term due to more jobs, higher wages, and more economic activity. In the end, we can maximize total tax revenue by moving away from economically inefficient taxes such as corporate taxes and long depreciation lives and toward taxes that collect revenue without damaging economic growth.
What's the difference between revenue and income? - Business - Answer Desk | NBC News
The resulting rates, high or low in comparison, can become targets for change. The mission of revenue administration is to provide prudent and innovative revenue, investment and risk management and to regulate the use of government capital. Manage and invest financial assets prudently Administer tax and revenue programs fairly and efficiently Manage risk associated with loss of public assets Regulate capital expenditure New real estate development may not only enhance the economic base of a state or community, and it may also expand the tax base.
It is not always the case, however, that new developments, especially if not properly planned, can in the aggregate, have a negative impact on the tax base. Economic development traditionally focuses on such things as job generation, the provision of affordable housing, and the creation of retail centers.
Tax base expansion focuses primarily on maintaining and enhancing real estate values within the municipality. Municipalities tend to pursue economic development with religious fervor and often do not think strategically about the overall real estate impacts of their economic development initiatives.
Yet the existing tax base in almost every municipality throughout the United States is an important source of revenue for funding municipal and school expenditures.
For public sector officials it is important to recognize the potential for a conflict between these two distinct, yet overlapping areas of public policy, and to establish procedures to achieve the proper balance in this regard.
In summary, the concept of tax base management is really one of asset management and is particularly important in U. In addition to being responsible for managing the tax base, a community should also be responsible for helping to ensure economic prosperity for its citizens. These two goals can conflict unless a long-term view is taken regarding public policy actions, and unless the impact of alternate development actions and programs and priorities are not carefully evaluated.