A curve which supposes that for a given economy there is an optimal income tax level to maximize tax revenues. If the income tax level is set below this level, raising taxes will increase tax revenue. And if the income tax level is set above this level, then lowering taxes will increase tax revenue. Although the theory claims that there is a single maximum and that the further you move in either direction from this point the lower the revenues will be, in reality this is only an approximation.
Related information about Laffer Curve:
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The chart below shows the Laffer Curve: The curve suggests that, as taxes increase from low levels, tax revenue collected by the government also increases .
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