The Laffer curve (approx. 1974) describes one after the economist Arthur B. Laffer designated connection between control item and tax receipts. The idea emerged already in Jonathan Swift tax multiplication table (1728).

If the control item is increased gradually on the basis of a sentence of zero, then also the tax receipts in a national economy rise. However only up to a certain point. If the control item is continued to increase beyond this point toward 100%, then the tax receipts decrease. This phenomenon develops, because higher control items can lead to a decrease of the economical output. This again can be attributed among other things to decreased work input. The Laffer curve subordinates however with the fact that the current achievement production of an enterprise was determined by the entrepreneur and not when reaction to the Marktnachfrage takes place.

In the national economy this theory finds to only decreased resemblance, since situation and apex of the curve (thus maximum tax receipts) cannot be defined exactly, since the curve hypothetical bases follows. Therefore mathematically also only 2 points on the curve can be determined:

If the control item (t) amounts to 0%, then the tax revenue (T) at the national income (Y) is therefore also 0.

T = t * Y corresponds to T = 0 * Y = 0

If the control item (t) amounts to 100%, therefore then the tax revenue (T) at the national income (Y) is 1.

T = t * Y corresponds to T = 1 * Y = Y

The entire national income comes as taxes the state to property. Since at this point however Y = 0 would amount to, so a national economy is not no longer conceivable, there the restaurant subjects money for the covering its (of critical) consumption would remain. Therefore the Laffer curve at this point sets also the tax receipts to zero.

An example of the effect described by Laffer can be read off (highly simplified) from the tax on tobacco increase in Germany:

Although the tax receipts would have to rise after the tax increases to tobacco goods, these are in the first half-year 2005 please. The assumption (there empirically not proven) behind the fact is that many humans gave now a smoking up, since it became too expensive them (see Prohibitivpreis). This condition is described by one point on the Laffer curve on the right of the apex. Statements, a certain price p (x) guarantee maximum tax receipts or a certain price p (y) all smokers to stopping (thus T = 0) would bring, could again only according to complex empirical studies be held.

Laffers theoretical connection, which he outlined according to own data for the first time on a napkin Washington restaurants, became particularly popular among offer-lateral economists. The economic policy of US president Ronald Reagan was considerably affected by it (Reaganomics).

Literature

• Yokes Schumann among other things: Fundamentals of the micro-economic theory. Springer, Berlin 1999. ISBN 3-540-660-81X.
• Gustav Dieckheuer: Theory and politics. 5. Edition. Springer, Berlin 2003. ISBN 3-540-005-641.

Articles in category "Laffer curve"

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