Sunday, September 19

The cost of taxation

Investor’s Business Daily:

There is a good reason why Republicans and Reagan Democrats oppose tax increases and favor spending restraints: A dollar of tax increase to pay for an additional dollar of government spending costs the economy much more than a dollar — and that price is payable in the form of fewer private-sector jobs and lesser living standards for low- and middle-income families. …

The extra economic cost of tax increases (over and above the tax itself) is a well-known phenomenon endemic to taxation. Economists aptly call this fundamental flaw in federal finance a “deadweight loss.” That’s because, counting both the economic loss and the bigger tax bite, the public suffers more dollars of harm than the government gains in tax revenue with which potentially to assuage the damage it caused.