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    36 views3 pages

    A Sinful Proposal

    Uploaded by

    Wawerudas
    TAX

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 3

    5/29/2017 Asinfulproposal

    Home AboutBHI News&Events ResearchTopics Publications ConsultingServices STAMP JoinBHI

    Asinfulproposal

    "Sintaxesare Theimpending5percentstatesalestaxoncigarettesillustratesa
    objectionable,finally, growingfascinationbypoliticiansofraising"sintaxes"todecrease
    becausetheburdens governmentdeficits.Itisasif,byraisingtaxesoncigarettesand
    alcoholicbeverages,thegovernmentcanfighttwosinsatoncethe
    imposedbythembearno
    deficitandconsumptionofthetaxedproduct.
    rationalconnectionwith
    thebenefitsofgovernment Thisideashowsupatthefederalandstatelevel.Congresshasbeen
    expenditures." threateningtoraisefederalexcisetaxesonbeer,liquorandcigarettes.A
    bipartisanNationalEconomicCommission,whichwillpresentadeficit
    reductionplantothenextadministration,islikelytorecommendand
    increaseinfederalexcisetaxes.

    Intheirfascinationwiththismethodofdeficitreduction,politiciansare
    committingsinseconomicsinsoftheirown.Economistsdisagreeon
    howtoreducethedeficit,onhowtomeasureitandevenonwhetherit
    matters.Butthereislittledisagreementaboutsinglingoutindividual
    productsfortaxation.Thisideaisoneoftheworstwaysofraising
    revenue.Itfailsthreetestsfordeterminingwhetherataxisgood:

    Theequitytest:Doestheburdenofthetaxvarydirectlywiththe
    taxpayer'sabilitytopay?
    Theefficiencytest:Doesthetaxdorelativelylittleharmtothe
    capacityofthemarketpricesystemtoprovideforanefficient
    allocationofresources?
    Thebenefitsreceivedtest:Doestheburdenimposedbythetax
    correspondroughlytothebenefitsthatthetaxpayerderivesfrom
    governmentexpenditures?

    Sintaxesdopoorlyontheequitytestbecausethehigherconsumer
    pricesinwhichtheyresultimposearelativelyheavyburdenonmiddle
    andlowincomepeople.

    Sintaxesdopoorlyonefficiencytests.Anymethodoffinancing
    governmentexpenditurescausesharmtothemarketpricesystem.The
    incometaxcausesharmbydistortingthewayinwhichpeoplemake
    choicesbetweenworkandleisureandsavingsandconsumption.The
    incometaxraisesthecosttoemployersofobtainingtheservicesof
    laborandcapital,anditlowerstherewardthatpeoplereceivefor
    providingthoseservices.Itleadstoadeclineinthevolumeoflaborand
    capitalservicesthatflowintoproductionandtoadeclineinproduction.

    Whiletheincometaxdiscouragestheproductionofgoods,itdoesnot
    discouragetheproductionofsomegoodsmorethanothers.Sintaxes
    distortthepricesofthegoodsonwhichtheyareimposedrelativeto
    others.AtaxonProductAmakesitappearrelativelymoreexpensive
    thansomeuntaxedProductB.Itcausesharmnotmerelybydiscouraging
    theproductionofAbutalsobyencouragingconsumerstosubstituteBfor
    A.Inconfusesthepricesignalsonwhichconsumersrelytoexerttheir
    sovereignwillonthemarketplace.

    http://www.beaconhill.org/Editorials/SinFulPropsal88013BG.htm 1/3
    5/29/2017 Asinfulproposal

    Someproponentsofsintaxessupportthembecausetheydiscouragethe
    consumptionoftheproductsonwhichtheyareimposed.Unfortunately,
    however,thiseffectisatoddswithconsumersovereigntyandwithusing
    thetaxtoraiserevenue.Themorethetaxdiscouragesconsumption,the
    lessrevenueityields.

    Sintaxesareobjectionable,finally,becausetheburdensimposedby
    thembearnorationalconnectionwiththebenefitsofgovernment
    expenditures.

    Agoodtaxsystemisoneinwhichtaxpayerspayforgovernment
    servicesroughlyinproportiontothebenefitsthattheyreceivefrom
    thoseservices.

    Sintaxesconcentratethecostsofprovidinggovernmentservices
    arbitrarilyoncertaingroupscigarettesmokers,beerdrinkerswhose
    compositionbearslittlerelationshiptothebenefitsthattheirmembers
    receivefromthoseservices.Smokersalreadypay42centsinfederal
    andstateexcisestaxesforapackofcigarettes,about28percentofthe
    saleprice.Thisgivesnonsmokersafreeride.Itencouragestheideathat
    governmentcanspendallitwantsprovidedthereisahandygroupof
    "sinners"aroundtobearthecosts.

    THEBOSTONGLOBE

    MONDAY,JUNE13,1988

    http://www.beaconhill.org/Editorials/SinFulPropsal88013BG.htm 2/3
    5/29/2017 Asinfulproposal

    http://www.beaconhill.org/Editorials/SinFulPropsal88013BG.htm 3/3

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