The popular media has lately been full of astonishing piffle with regards to taxation — so much so that a reasonably smart listener might suppose that there was some magnificent disagreement among economists, like there is among lawyers in a court case.
Of course, there is not; we economists are in broad agreement about the facts of taxation. This does not mean we agree about policy, for there is more to any policy decision than the truths of taxation. Still, we should be a bit mindful of demagoguery about taxes. This column will focus on known truths of taxation.
First, higher taxes on a good or service will lead to less of it being consumed and produced than would otherwise have been the case. So, a higher tax rate must lead to less economic activity, all things being equal.