Laffer Curve Tax Revenue Calculator

Enter a starting tax base, a tax rate, and a behavioral elasticity to estimate revenue after the tax base responds to the rate. The result shows revenue at your selected rate, the model’s revenue-maximizing rate, the maximum modeled revenue, and a series of points that makes the curve’s rise and fall easy to inspect. It is designed for teaching, sensitivity analysis, and clearly stated hypothetical comparisons rather than real-world revenue forecasting.

Define a transparent tax-revenue scenario

The calculator uses the deliberately simple equation R = B × t × (1 − t)^e. In that expression, B is the tax base before behavioral adjustment, t is the tax rate written as a decimal, and e is the behavioral elasticity parameter. The first two factors describe the mechanical revenue calculation: a larger base or rate initially raises collections. The final factor reduces the available base as the rate increases, standing in for changes such as less taxable activity, greater use of deductions, shifting between activities, or avoidance. Enter the tax base in any currency unit, provided you interpret every monetary result in that same unit. Enter the rate as a percentage between zero and one hundred. Because the model is stylized, its inputs should be labeled as assumptions whenever results are shared. A tax base of one million does not mean the calculator has measured an economy; it means the scenario begins from one million units of taxable activity before the assumed response. This separation keeps the arithmetic reproducible and makes competing assumptions straightforward to compare.

Understand why revenue peaks and then falls

At a zero tax rate, revenue is zero because no fraction of the base is collected. At a one-hundred-percent rate, this model also produces zero because the behavioral term reduces the taxable base to zero. Between those endpoints, revenue first rises as the government collects a larger share, reaches a maximum, and then falls as the modeled contraction of the base outweighs the higher statutory rate. For this equation, the peak is not guessed from the plotting samples: it is calculated analytically as t* = 1 / (e + 1). An elasticity of one places the peak at fifty percent, while a larger elasticity moves it lower because taxable activity is assumed to respond more strongly. The reported position tells you whether the selected rate lies below or above that peak, and revenue versus peak expresses the selected result as a percentage of the theoretical maximum. The sampled curve is for visualization and explanation; changing the number of points makes a chart smoother but does not change the exact peak calculation or the revenue evaluated at your chosen rate.

Interpret results without turning the model into a forecast

Use the output as a sensitivity exercise, not as a policy prescription. Real tax systems contain multiple rates, thresholds, deductions, enforcement rules, timing effects, interactions with other taxes, and behavioral responses that differ across people and activities. A single elasticity compresses all of those mechanisms into one assumption, so a precise-looking peak is only precise within the stated equation. A useful workflow is to hold the starting tax base constant, run several plausible elasticity values, and observe how both the peak rate and peak revenue move. You can also compare several proposed rates under the same elasticity, recording the estimated retained base and revenue for each scenario. If empirical evidence supports a different response function, use a model fitted to that evidence instead of treating this curve as universal. When presenting the result, include the formula, tax-base assumption, elasticity, selected rate, and currency scale. The capability is deterministic: identical inputs return identical results, which is valuable for classroom demonstrations, reproducible reports, automated scenario tables, and tests of downstream charting code. API use costs $0.002 per request, while the browser version can run locally.