David K.H. Begg, Gianluigi Vernasca-Economics-McGraw Hill Higher Education (2011)

CHAPTER 14 Government spending and revenue
The Laffer curve shows the relationship
between tax rates and tax revenue.
Moderate tax rates raise some revenue.
Beyond t*, higher tax rates reduce revenue
because disincentive effects greatly reduce
the supply of the quantity being taxed. At a
100 per cent tax rate, supply and revenue
will be zero again.
0 t*
Tax rate
100%
Figure 14.8
The Laffer curve
Figure 14.8 shows that with a zero tax rate the government gets zero revenue. At the opposite extreme, with a
100 per cent income tax rate, there is no point working and again tax revenue is zero. Beginning from a zero
rate, a small increase in the tax rate yields some tax revenue. Initially tax revenue rises with the tax rate, but
beyond the tax rate t* higher taxes have major disincentive effects on work effort, and revenue falls.
Professor Laffer's idea was that