The Oscars

Harmful Effects of Taxation

Alex Tabarrok makes an excellent point about taxation: incentives are distorted.

A related point would be that it's wrong to assume that since an average person spends 40% of their income on health care, one needs a 40% tax rate to cover health care costs. Because of the incentives being distorted, one will likely need the tax rate to be higher than 40%. Of course, I am assuming that at 40%, we're still behind the peak of the Laffer curve.


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