How does the Laffer Curve apply to economic policy?

How does the Laffer Curve apply to economic policy?

The Laffer Curve applies to economic policy by illustrating the relationship between tax rates and government revenue. It suggests that there is an optimal tax rate that maximizes revenue, beyond which further increases in tax rates will lead to a decrease in revenue. This concept is used to inform decisions on tax policy, as it highlights the potential negative effects of excessively high tax rates on economic growth and government revenue.