Tuesday, August 12, 2008

If You Tax Something, You Get Less of It, Part II

Exhibit A: Maryland's $2 a pack cigarette tax, see yesterday's post.

Exhibit B: Chicago's new bottled water tax, which has brought in just $2 million since going into effect on January 1 through the end of May, far off track for the $10.8 million Chicago city officials hoped it would raise this year, according to the Tax Foundation. As one retailer said, "There's no reason someone is gonna pay $1.20 extra in taxes for a $4 dollar case of water in Chicago when they can go to the suburbs to buy it without that tax."

Mayor Daley blamed the disappointing tax revenues on "the weather." Reminds me of how the Communists in the Soviet Union and China used to cite "bad weather" for the significant reductions in production after collective farms were imposed. I vaguely remember some story about the Soviets going from being a grain exporter before its farms were collectived by Stalin in the late 1920s and early 1930s, to having "50 straight years of bad weather" as the excuse for the disappointing production levels and even starvation resulting from Communist collectivization.

HT: Travis Walker

7 Comments:

At 8/12/2008 10:08 AM, Anonymous Anonymous said...

Sales going to the suburbs causing loss of tax revenues? Why do I get the feeling that these control freaks will try to push for a state-wide tax on bottled water?

 
At 8/12/2008 5:05 PM, Blogger juandos said...

"Why do I get the feeling that these control freaks will try to push for a state-wide tax on bottled water?"...

Have you heard of Illinois' state wide ban on smoking indoors in public places?

It started with Daley and the city of Chicago and then this disease spread through out Cook county...

It wasn't to long after that Gov. Blagojevich and Il house chambers foisted off on the whole state...

Can you guess the downsides even after Illinois already had had a lesson on what happens with excessive taxation? The gasoline tax...

Casinos saw an immediate and drastic drop in business while the states of Iowa, Indiana, and Missouri saw a hefty increase in that same sort of traffic?

'Mom & Pop' corner taverns and diners saw an immediate drop in business and many have already closed...

Leave it to liberals to kill the goose that lays the golden egg...

 
At 8/12/2008 8:15 PM, Blogger OBloodyHell said...

> to having "50 straight years of bad weather" as the excuse for the disappointing production levels and even starvation resulting from Communist collectivization.

C'mon, everybody, jump on the bandwagon, and say it with me:

"It was all the fault of Global Warming!!!"

LOL.

 
At 8/12/2008 11:30 PM, Blogger randian said...

Liberals don't care about unintended consequences.

 
At 8/13/2008 6:28 AM, Anonymous taxman said...

Alright, so by this logic, taxes are a disincentive to do something or to buy something. Therefore the optimal tax rate would be...what? As close to zero as possible?

 
At 8/13/2008 9:47 AM, Anonymous Anonymous said...

"Therefore the optimal tax rate would be...what? As close to zero as possible?"

Yeah, it's called the deadweight loss of taxation. It's in any Econ 101 textbook. One estimate I've read (maybe it was on this blog) was that the collection of Federal Income tax revenues reduced overall GDP by something like $5 trillion.

 
At 8/13/2008 2:05 PM, Anonymous taxman said...

But the thing is, the corporate rate of taxation effectively IS near zero for most corporations according to the GAO.

 

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