IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

The shifty Laffer curve

Listed author(s):
  • Zsolt Becsi

Any number of U.S. politicians owe their success to emphasizing tax cutting. According to logic, voters are opting for fewer government services or for changes in the mix of services rendered. It is at this point that things become complicated, however, because what happens to expenditures influences how much revenue a government needs to collect. The author of this article observes that a good place to start in understanding the impacts of tax policy is with what is popularly known as the Laffer curve. This curve became famous early in the 1980s when tax rates fell but tax revenues did not rise as the curve predicted, and the United States resorted to deficit spending. This article examines the macroeconomic and conceptual issues that may have made a difference. ; Because most analyses of the Laffer curve occur in a static framework that has proved inadequate, this analysis presents a simple dynamic model useful for analyzing the long-run effects of tax policies. The model also can easily be extended to analyze the disposition of government revenues and the consequent effects on national income. ; It turns out that how the government spends its tax revenues-on consumption, investment, or transfers-is important for understanding the Laffer curve. In fact, a different Laffer curve is associated with the different ways revenues are spent, and it is important to know which curve one is operating on when designing tax policies.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Article provided by Federal Reserve Bank of Atlanta in its journal Economic Review.

Volume (Year): (2000)
Issue (Month): Q3 ()
Pages: 53-64

in new window

Handle: RePEc:fip:fedaer:y:2000:i:q3:p:53-64:n:v.85no.3
Contact details of provider: Postal:
1000 Peachtree St., N.E., Atlanta, Georgia 30309

Phone: 404-521-8500
Web page:

More information through EDIRC

Order Information: Email:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

in new window

  1. Guesnerie, Roger & Jerison, Michael, 1991. "Taxation as a social choice problem : The scope of the Laffer argument," Journal of Public Economics, Elsevier, vol. 44(1), pages 37-63, February.
  2. Malcomson, James M., 1988. "Some analytics of the Laffer curve : Reply," Journal of Public Economics, Elsevier, vol. 35(1), pages 131-132, February.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fip:fedaer:y:2000:i:q3:p:53-64:n:v.85no.3. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Meredith Rector)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.