EclectEcon

When designing a tax system and evaluating tax proposals, policy analysts have at least four goals in mind:

1. Efficiency: The tax system should distort incentives as little as possible (and, in the case of externalities and Pigovian taxes, correct incentives when necessary).
2. Intergenerational equity: The tax system should raise enough revenue so current generations do not unduly burden future generations.
3. Egalitarianism: The tax system should try to achieve a more equal distribution of after-tax incomes.
4. Stabilization: The tax system should help maintain the economy at full employment.

Let me offer a different picture.

When designing a tax system and evaluating tax proposals, policy analysts have at least four goals in mind:

* Reelection of the incumbent party.
* Nondecreasing interest groups’ income.
* Having the burden fall on the least (politically) organized group possible.
* Bullying the central bank into monetarizing the debt.

Harsh, I know, but don’t come to me complaining when you’ll get European-style G shares of Y. (60%+) You have been warned.