If there must be taxation, I propose that the only object that be taxed is economic ignorance: its supply is both abundant and extraordinarily inelastic.
The following letter, co-authored with Marcus Rugger, is to a reporter for the Associated Press:
Mr. Stephen Ohlemacher
Dear Mr. Ohlemacher:
Writing about tax day in the U.S., you assert that “it’s not that bad. Aside from the complicated forms, tax season generates $300 billion in tax refunds each year, a significant boost to the U.S. economy” (“Five Things to know about Tax Day: For most, it’s not that bad,” April 15).
From where do you think these refunds come? If the economy is boosted when such funds are returned to their rightful owners, surely the economy was earlier dragged down when government initially seized these funds. Even ignoring (as you do) the supply-side effects of taxes – which always are a drag on taxed activities – have you any theory to justify your strange implication that people increase the amounts they spend when they become more liquid but do not decrease the amounts they spend when they become less liquid?
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030