Laffer Curve

From Reuters Financial Glossary

A description of the theoretical effect of different tax rates on total tax income. Total government income rises as tax rates rise from low levels, but from a certain rate upwards the total income starts to fall because taxpayers do not have an incentive to work hard and increase their incomes. Named after Professor Arthur Laffer, an advisor to President Ronald Reagan in the 1980s, this theory is a building block in supply-side economics

See also: Supply-side Economics