Put a tax on a market and see who really pays it — buyers or sellers — how much value it destroys, and why raising the rate can't raise revenue forever.
See that the side a tax is placed on doesn't decide who bears it — elasticity does — and that raising the rate eventually lowers revenue.
Start at the default tax with equally steep demand and supply. Notice how the burden splits between the buyer price and the seller price.
When buyers and sellers are equally responsive, how is the tax shared between them?
Who bears the tax — the wedge, revenue, and deadweight loss
Demand meets supply at the no-tax price. A per-unit tax opens a wedge: buyers pay the higher price, sellers keep the lower one. The shaded rectangle is government revenue; the amber triangle is the deadweight loss — trades the tax destroyed.
The Laffer curve: revenue vs. tax rate
Government revenue as the tax rate sweeps from zero to the choke rate. It climbs, peaks, then falls — past the peak, a higher rate raises less. The dashed line marks your current rate; the green dot marks the revenue-maximizing rate.