Paying $3.99 for diapers instead of $4.19 gives Mom 20 cents more she can spend on lean ground beef instead of mostly filler. And that’s a good thing for kids. But governments need to fund themselves, and the ‘fairest’ way to do so – fairest in the sense that that’s where most of the hard-to-hide money is – is to tax the exchange of wealth for consumables.

The rich exchange more of their wealth for consumables than do the poor, but the poor exchange all of their wealth for consumables. So some people think taxation should be targeting those higher ticket items, like cars and electronics, and leave the necessities of life, like diapers and ground beef, alone. Unfortunately that wouldn’t fill its coffers enough to do more than a fraction of the things we want the government to do for us. So 5% on diapers it’s going to have to be.

But funding itself is only one of the things governments do with taxes. The other is encouraging exchanges that are socially desirable, and discouraging exchanges that are not. So no or low taxes on milk and toilet paper, high taxes on cigarettes and alcohol. The problem is poor people smoke and drink more than rich people. In fact for some poor people cigarettes and alcohol are the only compensation they have for their poverty. So what to do?

If we multiply these countervailing vectors across the entirety of political economy, we can begin to see just how impossible it is to come up with policies that don’t produce winners and losers. Sometimes more losers than winners. But even there sometimes an aggregate gain. Small consolation to those absorbing the loss. But sometimes we’re willing to take a loss if it’s dwarfed by the other’s gain.

I fully expect the banality award for this. But some banalities are worth keeping in mind when we’re on the cusp of getting into high dudgeon over the latest governmental stupidity. Which is not to say governments don’t do stupid things. It’s to say only that it’s always worth asking what you’d do instead. I think Forrest Gump had something to say about that.

Categories: Everything You Wanted to Know About What's Going On in the World But Were Afraid to Ask, Social and Political Philosophy, Why My Colleagues Are Idiots

Tags: distributive justice, economics, political economy, taxes