Daniel J. Mitchell

As a fiscal policy economist, one of my responsibilities is to educate policy makers about the impact of taxation.

Simply stated, I try to help them understand that taxes alter behavior. If you tax something at a higher rate, you get less of whatever is being taxed.

Politicians actually understand this basic lesson when it suits their purposes. Many of them will pontificate that we need higher tobacco taxes to discourage smoking.

I don’t think it’s government’s job to dictate our private lives, so I don’t agree with the policy, but I give them an A+ for economics. Higher taxes on tobacco will lead to less tobacco consumption.

My frustration is that politicians conveniently forget this elementary analysis when the discussion shifts to taxes on productive activities such as work, saving, investment, and entrepreneurship.

And they also fail to realize that the higher taxes on tobacco will lead to more illegal smuggling and other actions that result infar less revenue than politicians think they’ll collect.

But let’s set that aside and look at some truly remarkable examples of how taxes influence things that – at first glance – seem completely impervious to fiscal policy.

Would anyone think, for instance, that taxes could impact the day people are born? Well, here’s some new research, as summarized by Dylan Matthews at the Washington Post.

Daniel J. Mitchell

Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy at the Cato Institute.