Why taxing everyone half a cent matters

Economics Economics Questions
1

I had been wondering for a while “what if government taxes us all half a cent. Would that really create economic inefficiency? Surely half a cent will not make a dent in anyone’s account. You can’t get a Bruger for half a cent. You can’t even get a paperclip for half a cent, likely.”

I answered my own question:

It does matter. Why? Because just as the government can “collect” half-cents, so can private businesses. For example, imagine that an entrepreneur got half a cent from every single person in the US. That’s more than $150 million! With that money he could start a gigantic business - or, he could enjoy himself for the rest of his life! In the case of the business, those half-cents that he collected together make a big, real difference - an ability to divert capital from other sectors of the economy.

So yes, even taxing one half-penny of everyone’s wealth creates misallocation.

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Clayton -

3

The issue is also how practical this would be.

4

Haha the costs alone of taxing everyone half a cent would make in incredibly cost __in__effective.

5

Not if they charge an administrative fee of $49.99.

6

Now you’re thinking like a statist!

“We didn’t raise taxes on you, you are only paying half a cent in taxes. See, that $49.99 fee is not a tax. So we couldn’t have raised taxes on you.”

7

$.005 from each person in the US would not get you $150 million. That would take $.50 from each person.

And of course the government taking just a little, is like playing “just the tip”.

8

Good catch. Wow. Yeah. It would be $1.5 million. That’s still enough to start a good business.

9

a national government with 1.5 million in funding would have a rather poor defence ability.

if government got all money by donations, it would be getting billions if not trillians probaly. some church with 10% and 350 million members would be making trillions if its 10% gdp

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a national government with 1.5 million in funding would have a rather poor defence ability.

That’s not what I’m suggesting at all…

11

so national defence, wise, are you suggesting a national defence means economic inefficency and misallocation?

is it the same if it’s a .5 cent fee from citizens rather than called a tax?

does that make it different from a defence company charging .5 cent for each client?