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Posts Tagged ‘Deadweight Loss’

The Deadweight Loss of David Foster Wallace's Tax

In his posthumous novel The Pale King, David Foster Wallace describes a fictional progressive sales tax in Illinois that imposes higher rates the larger the amount purchased.  Sounds good and fair — tax those who make larger purchases. Not surprisingly, it generates a substantial deadweight loss: People buy a few things, take them to their cars, then come back and buy more.  Auto dealers sell parts separately to reduce the average tax rate on consumers. If this sales tax was real, the deadweight loss would be borne especially heavily by low-wage people.  Those who feel pinched for cash but whose time is less valuable would be more likely to engage in tax-avoiding activities like repeated small purchases.  (HT to TW)


The Deadweight Loss of Brett Favre

If you’re looking for a silver lining in this bad economy and especially in a dismal Christmas retail season, you can at least console yourself with the thought that there will be less deadweight loss this year than in past Christmases — that is, less inefficiency generated by people spending money to buy things for other people who value the . . .