Re: Krugman on gas tax

["John O'Donnell" <jackodonnell@xxxxxxxx>]

"Alan G. Isaac" wrote:
>
> Some pkt'ers may find this of interest.
>  http://www.nytimes.com/2000/09/17/opinion/17KRUG.html

WOW!!! Even Krugman can get it right occasionally. Now if
only economists could see the reality of this general
principle -- to slow demand increase the price, by taxes if
you must -- and apply it to tax policy in general. In the
words of Henry George as quoted in the dedication to my
_Three Steps to Economic Freedom_:
"But the great class of taxes from which revenue may be
derived without interference with production are taxes upon
monopolies - for the profit of monopoly is in itself a tax
levied upon production, and to tax it is simply to divert
into the public coffers what production must in any event
pay."

In essence, taxation of petrol reduces the monopoly price
OPEC can extract from the oil importing nations. The logical
call by economists should be to clamor for the U.S. to
INCREASE its tax on gasoline to reduce the demand that
sustains the price for other importing nations. In order to
accommodate the deleterious effect of such a price change on
the U.S. economy because of the obvious need for time to
change the U.S. inventory of motor vehicles from gas
guzzlers to high efficiency [Such as the change in fleet MPG
that followed previous price increase by OPEC. To accomplish
this the tax could be implemented gradually, say an increase
of $0.01 per gallon per month for several years, in order to
minimize the deleterious effect of a sudden change.

Likewise, if economists would but open their eyes to this
simple truth, taxes on wages [Collected either as "wage
taxes" collected for the effrontery of hiring labor or as
"income taxes" collected for the equally obvious crime of
working.] ultimately increase the cost of labor thereby
increasing unemployment whereas gradually reducing these
taxes would lead to lower nominal wages [i.e. -- "variable
costs of production"] without reducing the standard of
living of labor. Carry this a bit farther and it becomes
equally obvious that a general subsidy to people will
further reduce nominal wage demands while further reducing
the variable costs of production. The revenue can, of
course, be replaced and/or supplemented with my proposed
"monopoly tax" that would collect the monopoly/economic
profits that will, as Henry George noted, be collected in
any case.


--
			-- jbod

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