"Henry Hazlitt was one of a very special breed, an economic journalist who not only reported on economic and political events in clear and understandable language, but also made contributions to economics."
"We came out and said there was a digital revolution happening and it was going to change everything," says Louis Rossetto, who co-founded Wired magazine 20 years ago in 1993. "And [that] it wasn't the priests, the pundits, the politicians, and the generals who were creating positive change."
That's the introduction to the following Reason.tv video interview that I found fascinating.
In the study of economic the theory of Excess Burden always provokes differing thoughts. Excess Burden arises due to taxation and is what is referred to by economists as deadweight loss. VAT is a good example of a tax where the price of a good is distorted and does not reflect the equilibrium between supply and demand.
For example, some coffees, like Starbucks and Dunkin Donuts, are sold above the equilibrium price because it can be sold at near monopolistic prices making the seller excess profits. As a result, consumers will buy less coffee because of the higher price. The surplus profit made by our two brand names will be less than the value that the coffee that consumer did not purchase. The difference is deadweight loss. This concept is certainly good for Starbucks and Dunkin Donuts, but in the aggregate is not good for the economy.
Excess Burden occurs when government impose taxes on goods and services. This tax will be passed on to the ultimate consumer in the form of an increased price of the goods or services sold. Government gets the amount (increase in price) of the passed on price increase paid by the consumer. However, because of the increased price, consumers will buy less of the product than they would have otherwise. In effect tax cost is more than the money the government takes in. It also includes those goods and services that would have been consumed but will not be because of tax.
There is a hidden lesson here that perhaps is being overlooked by both government and the private sector when looking at the application of VAT to our economy. Such a sudden introduction of VAT will bring to the surface the Excess Burden Theory as consumers will respond in a similar manner as described above. Rapidly changing consumer preferences will have profound negative effects on the Bahamian economy with unexpected economic outcomes which will stymie real growth, increase unemployment, expand poverty and increase inflation.
That is why VAT is simply a Very Awful Tax.. In Part II, we shall briefly explain the neo-Keynesians view of Excess Burden.
"By most measures, there has never been a better time in history to inhabit our planet. A growing body of evidence points to dramatic improvements in human well-being. These improvements are especially striking in the developing world.
"Meticulously created and managed, HumanProgress.org is a new, free, innovative website that steadily follows and documents the forward march of human progress. This new site closes the gap between the often pessimistic public perception and a more optimistic reality, and is a comprehensive new research tool that provides data in an easily accessible manner, enabling users to:
Explore human development indicators from a wide range of sources.
Compare different indicators with one another.
Create and share visually compelling and information-packed graphics.
Calculate differences in human well-being between countries over time.
The following post was a comment left by a visitor calling themself Anti Waste, at this post...about St. Lucia's VAT experience. What do you think?
Financially-speaking, the size of government and its waste and inefficiency—along with bad education—are the most profound enemies of the Bahamas and all its people. (Our social diseases are even worse, but that's a discussion for another day.) To reduce our bloated government and its spending, a completely new "culture" and thinking are needed. Each government employee's work habits and each department's processes need to be scrutinized and then overhauled.
Almost in any department, apathy and "don't care" attitudes are the order of the day. True, while there are many good people trying hard and deserve credit, their good work is frustrated by archaic processes and unmotivated people around them. You see it everyday: sheer laziness, standing round talking and doing nothing, preserving the status quo, passing the buck, fear of accountability, lack of efficiency goals, lack of leadership and wasting our taxes. These are the diseases that are crippling this country's finances.
VAT is like putting a sheet of paper over a hole or using a Bandaid on a dying body. This country will never thrive like Singapore, Hong Kong, or even Cayman, until the government is forced to stop wasting our tax money through the inefficient processes and staff in each department (and in education).
We see bad grades year-over-year, graduating unemployable school leavers, delays in the law courts, an archaic, paper-bound police force, and unmodernized processes in every government department. We see problems taking forever to get solved: delays getting a building permit, not being able to pay and register a company online, missing documents and long paper trails because departments are not properly computerized.