Economics Laffer Curve Questions
The impact of tax regressivity on the Laffer Curve is that it can potentially shift the curve to the left. Tax regressivity refers to a tax system where the burden falls disproportionately on lower-income individuals, while higher-income individuals pay a smaller proportion of their income in taxes.
When taxes are regressive, lower-income individuals have less disposable income, which can lead to reduced consumption and economic activity. This can result in a smaller tax base and lower tax revenue for the government. As a result, the Laffer Curve, which illustrates the relationship between tax rates and tax revenue, may shift to the left, indicating that reducing tax rates may not necessarily lead to an increase in tax revenue.