Tax incidence revisited, part 5: Who really pays the tax?

JDN 2457359 I think all the pieces are now in place to really talk about tax incidence. In earlier posts I discussed how taxes have important downsides, then talked about how taxes can distort prices, then explained that taxes are actually what gives money its value. In the most recent post in the series, I … Continue reading Tax incidence revisited, part 5: Who really pays the tax?

Tax incidence revisited, part 4: Surplus and deadweight loss

JDN 2457355 I’ve already mentioned the fact that taxation creates deadweight loss, but in order to understand tax incidence it’s important to appreciate exactly how this works. Deadweight loss is usually measured in terms of total economic surplus, which is a strange and deeply-flawed measure of value but relatively easy to calculate. Surplus is based … Continue reading Tax incidence revisited, part 4: Surplus and deadweight loss

Tax incidence revisited, part 3: Taxation and the value of money

JDN 2457352 Our journey through the world of taxes continues. I’ve already talked about how taxes have upsides and downsides, as well as how taxes directly affect prices and “before-tax” prices are almost meaningless. Now it’s time to get into something that even a lot of economists don’t quite seem to grasp, yet which turns … Continue reading Tax incidence revisited, part 3: Taxation and the value of money

Tax incidence revisited, part 2: How taxes affect prices

JDN 2457341 One of the most important aspects of taxation is also one of the most counter-intuitive and (relatedly) least-understood: Taxes are not externally applied to pre-existing exchanges of money. Taxes endogenously interact with the system of prices, changing what the prices will be and then taking a portion of the money exchanged. The price … Continue reading Tax incidence revisited, part 2: How taxes affect prices

Tax Incidence Revisited, Part 1: The downside of taxes

JDN 2457345 EST 22:02 As I was writing this, it was very early (I had to wake up at 04:30) and I was groggy, because we were on an urgent road trip to Pennsylvania for the funeral of my aunt who died quite suddenly a few days ago. I have since edited this post more … Continue reading Tax Incidence Revisited, Part 1: The downside of taxes

What you need to know about tax incidence

JDN 2457152 EDT 14:54. I said in my previous post that I consider tax incidence to be one of the top ten things you should know about economics. If I actually try to make a top ten list, I think it goes something like this: Supply and demand Monopoly and oligopoly Externalities Tax incidence Utility, … Continue reading What you need to know about tax incidence

The potential of an advertising tax

Jan 7, JDN 2458126 Advertising is everywhere in our society. You may see some on this very page (though if I hit my next Patreon target I’m going to pay to get rid of those). Ad-blockers can help when you’re on the Web, and premium channels like HBO will save you from ads when watching … Continue reading The potential of an advertising tax

How not to do financial transaction tax

JDN 2457520 I strongly support the implementation of a financial transaction tax; like a basic income, it’s one of those economic policy ideas that are so brilliantly simple it’s honestly a little hard to believe how incredibly effective they are at making the world a better place. You mean we might be able to end … Continue reading How not to do financial transaction tax

Something is wrong with the corporate income tax

JDN 2457369 The US corporate income tax is clearly not working. While at one time the corporate income tax took in almost as much revenue as the personal income tax, those days are long gone. In 1934 the personal income tax took in $420 million and the corporate income tax took in $364 million, (adjusted … Continue reading Something is wrong with the corporate income tax

How about we listen to the Nobel Laureate when we set our taxes?

JDN 2457321 EDT 11:20 I know I’m going out on a limb here, but I think it would generally be a good thing if we based our tax system on the advice of Nobel Laureate economists. Joseph Stiglitz wrote a tax policy paper for the Roosevelt Institution last year that describes in detail how our … Continue reading How about we listen to the Nobel Laureate when we set our taxes?