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The Price Elasticity of Politics

By Gerard O’Neill @ Turbulence Ahead

Thursday, March 5, 2009

The Green Party wants to put a 1c tax on texts. The Labour Party wants to remove tax breaks from landlords. Some politicians have clearly never heard of incentive effects. Generally if you make something more/less expensive to do then people will do less/more of it. Like increasing the vat rate in December (the biggest month of the year in retailing) … and seeing vat revenues fall in January and February.

Politicians are supposed to have superhuman powers of empathy (all those chats in their clinics every weekend must surely demand it) and yet they cannot put themselves in the shoes of the people they want to tax and ask themselves ‘what would I do if it got more expensive/less rewarding to do something because of this tax’? But they’re going to have to extend their empathy to taxpayers pretty soon because the gap between government spending and taxes is yawning widely – as illustrated in the chart from a recent post on The Irish Economy blog by Patrick Honohan.  Link to article

Posted in News, Site Value Tax.

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