Tax Update Blog: Permalink

« Previous · Tax Update Blog Home · Next »

IS IT SOMETHING IN THE CHEESE?

June 01, 2007

Iowa's governor hasn't been distinguishing himself on the tax policy front, but it sure could be worse. The governors of Iowa's eastern neighbors seem to be competing in a tax insanity olympics.

Illinois Governor Not Yet Indicted led off by imposing a gross receipts tax that lost by a razor-thin 0-107 margin in the Illinois House.

Now Wisconsin Governor Jim Doyle is attempting the fiscal equivalent of commanding the tide to turn back. He proposes a 2.5% gross revenue tax on oil companies, with criminal penalties if the tax is passed onto consumers.

With all due respect to Governor Doyle, that's moronic. As the Tax Policy Blog notes:

It's hard for any economist not to laugh at politicians who try to legally enforce the economic incidence of a tax. Any first-year microeconomics student will learn that the taxpayer who is legally required to pay a tax is not always the one who will really bear the economic incidence of the tax. What students aren't directly taught, however, is that on rare occasions politicians try to control both the legal incidence and the economic incidence of a tax. For that, the students merely need to flip back to their notes from the first week of class under the heading "price controls."

Imposing a tax on oil companies in Wisconsin will decrease the supply of energy brought to Wisconsin, ceteris paribus, which will raise the price of energy. And not allowing the price to increase would only lead to a shortage of energy.

By the way, ceteris paribus is a latin phrase meaning "Wisconsin leads the nation in binge drinking." Which could help explain why this might actually pass.

      Bookmark: del.icio.us • Digg • reddit