Taxes and Taxis

The Economist has a good article on tax cuts and whether or not they can help the global economy. I particularly like this way of framing the tax problem.

As a vote-winning measure, tax cuts have obvious appeal: people usually prefer to spend their money themselves, rather than let the government do it. But to economists, the question is a bit more complicated. Given that governments must raise money through taxation, how can they do so at least cost to the economy? By and large, economists prefer taxes that change the relative prices of goods and services as little as possible, and so cause the minimum distortion to people's spending and investment decisions.

I think the American tax system fails miserably here. Tax laws play a huge role in the business and investment decisions people make, and thus distort the free market and misallocate resources. Tax policy is complex, and I can't say I have a good answer, but surely there is something better than the mish-mash group of taxes we pay now.

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