Illegality and Taxation
Making drugs illegal doesn't eradicate them, it just makes the supply curve steeper. This is because suppliers still bear the cost of transporting drugs, but the costs of the risks involved with doing so are much higher. Risk factors of distribution also increase the potency of the drugs. If you're going to risk making drugs, you might as well make them stronger because the danger and repercussions are the same regardless of how effective the drugs are. As these drug producers decide to grow/make more, the supply becomes more and more elastic.
Excise Taxes: the sellers have to write the check to the government --> the legal liability just refers to who is writing the check
Raising taxes isn't costly, but the act of doing so is costly. The price of the good also doesn't increase by the amount of tax that's placed upon it. Taxes get in the way of exchanges because they cause supply and demand (depending on the type of tax) curves to shift in. It's the value of the forgone transactions due to taxes that cost everyone money. Even the IRS is costly--11 billion dollars per year are spent to run it. People at the IRS aren't creating anything of value. Essentially, they are a dead weight to society. This dead weight loss is separate from tax fraud, which is encouraged by the complexity of the US tax code.
No comments:
Post a Comment