No Free Lunch

There would be similar effects on the temporarily poor aka young people starting out aka our future.

I had not planned to do two taxation posts in a row, particularly since the e-tax vote has passed. Taxation itself will continue to be a topic of public debate, and a comment to my last post challenged a premise that I still think is correct. There's also a lesson about taxation which I'll get to later.

My premise was that if the e-tax goes away, the necessary increases in property taxes and utility fees will make housing more expensive and push the poor into the surrounding suburbs. I was thinking mainly of the chronically poor, but there would be similar effects on the temporarily poor aka young people starting out in life aka our future.

To understand why I think this, consider a parallel that at first glance would seem to not be parallel at all. In 1990 the Federal government decided to tax producers of luxury boats, not the kind average folks buy for weekends at the lake, but sea-going vessels with the then starting price of $60,000. The tax was steep--$10,000 per boat. Boat makers attempted to pass part of this tax to their customers. In response their customers bought used boats, or bought them from Europe, or went without.

Here's the two sequences side by side:

Tax Levied	Boat production	Increased property tax and utility fees
Tax Passed On	Increase in the price of boats	Increase in the price of housing
Resulting Movement	Drop in demand for boats	Drop in demand for housing

Changes in tax policy are always sold to voters as the thing that will solve some problem.  The opponents usually tell me that the world will come to an end if the change is made.  Common sense should tell me that the change may not be all it's cracked up to be. Common sense should also tell me that said change will always have a down side, even if the world doesn't come to an end.  You can't get something for nothing.  Or as Robert Heinlein linked to say, there ain't no such thing as a free lunch.