What Is the Revenue-Maximizing Tax Rate?

3 Pages Posted: 22 Feb 2012  

Bruce Bartlett

Independent

Date Written: February 20, 2012

Abstract

Barack Obama has proposed raising taxes on the well-to-do, both for revenue and distributional reasons. This raises, anew, the question of what the revenue-maximizing top rate is. Conservatives continually assert that the United States is always on the wrong side of the "Laffer Curve," such that a tax rate reduction will increase revenues. A review of recent literature on this subject, however, indicates that the top tax rate could rise very substantially before a further increase would lead to lower revenues. Estimates suggest that this rate is at least 63 percent and probably much higher.

Keywords: Laffer Curve, tax rates

JEL Classification: K34, H20

Suggested Citation

Bartlett, Bruce, What Is the Revenue-Maximizing Tax Rate? (February 20, 2012). Tax Notes, Vol. 134, No. 8, 2012. Available at SSRN: https://ssrn.com/abstract=2008750 or http://dx.doi.org/10.2139/ssrn.2008750

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