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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.
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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
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