Why do you expect a tariff to increase employment? It reduces both imports and exports — trade is trade. More employment in import-competing industries, less in export industries.
But reducing trade distorts the economy, encouraging less efficient production at the expense of more efficient production.
As David's father said, IIRC, when a Chinese official bragged about all the construction workers using shovels and wheelbarrows so there would be more on the job, if that was their sole goal, why not use spoons?
Why not ban ATMs? Why not bring back elevator operators and telephone switchboards? Make self-service gas stations mandatory again.
“ The fact that another country has a tariff, hidden or not, is not a reason for the US to have one.”
This is completely true.
However, the fact that other countries have tariffs on U.S. produced goods is a quite excellent reason for Trump to have used the leverage he clearly had to get those tariffs and NTBs reduced in so many countries.
Yet this aspect of the story is almost never mentioned by critics of tariffs.
If you’re gonna criticize Trump’s tariffs, it seems only fair to praise his clear demonstrated tariff-reduction efforts.
I ain’t a tariff expert by any means, but pretty sure he is responsible for more tariff reductions than anyone in the last 40+ years.
Yes, but for those looking for 'fairness', the recent agreement for 0% European tariffs on US goods compared to 10-15% US tariffs on European goods, considering the VAT may cause that to be somewhat 'fair'.
--I have learned that it is intellectual suicide to discuss international trade theory on the internet. I have broken my own vows to never do it again. For this, I deserve to be punished.
--Whenever someone uses the word "fair" my hands start shaking because I know he wants something from me.
No. VAT is collected on imports at the same rate as on domestic production. VAT is a pure consumption tax, whereas a tariff is a consumption tax with some of the revenue going to producers. VAT creates one distortion. A tariff creates two.
To raise the same amount of money, the tax % must be higher in a small market than a large market. Distortions are proportional to the square of the % take. So the same tax amount in a large market will have smaller distortions than in a small market. Employment is much larger than international trade, which is why most successful countries primarily rely on income tax.
That all said there's political considerations, national security, entrenched interests, regulatory issues, tax evasion, that can cause tarrifs to work relative to employment tax. However they start out far behind due to distortions.
Because the US is moving towards a gig economy, and income tax and vat is very hard to collect efficiently from gig workers, my opinion is tarrifs are going to become more significant.
US tariff rates around 20% in the late 1800s corresponded with the US growing to be the wealthiest nation in the world. They were the primary federal revenue source then.
Also, moderate tariffs in the 1950s corresponded with prosperity.
“But tariffs in general seem not as bad as payroll taxes which reduce incentive for working.”
For low to moderate tariffs on consumer goods, I’m inclined to agree with you.
For higher tariffs, or most any tariff on intermediate goods, I definitely do not agree with you, as the reduction in specialization, trade and comparative advantage is likely worse for aggregate wealth than payroll taxes which are relatively moderate, and which on the margin generally have fewer incentive distortions.
Unfortunately, facts and logic are pretty much in an angry divorce proceeding from politics.
People who say "Tax Corporate Profits" have zero understanding of Corporate accountancy, much less of why places like the Cayman Islands (Still? I don't keep up...) are popular legal homes for international concerns and least of all that a corporation is just a group of people....I'd wager nontrivial money they don't know that the DNC and RNC are corporations.
See also "excess profits tax," "tax on big oil/pharma/boogeyman of the week"...
Since I believe in what we pay because of government to be very transparent, we need to move away from our current income/payroll tax system to something that is more transparent to Americans. Anyone can look at a sales receipt and determine how much they paid in sales tax even it it is included in the price. For example, the FAIRtax rate would be 30%. If you checked out at the store and your bill is $130, you would know that $30 was the tax you paid the federal government.
Transparency is the fear of government and they prefer to hide the true costs of government.
How about who gets the benefits? E.g. obviously a US tax on aluminium imports will benefit US aluminium producers and non-US aluminium consumers, but do we have any idea how those benefits are distributed?
Regarding corporate tax and elasticity of capital regarding dividends - for a variety of reasons passive index funds have an advantaged regulatory environment. These funds trade based on inflows/outflows and market capitalization rebalancing. Since no analysis is done on dividends, this has caused PE ratios to balloon due to reflexivity and reduced liquidity from active managers - basically the flows from passive overwhelm the capital access active fundamental managers have, preventing efficient reallocation (they can't sell because they already sold; they can't short because they will get margin called). If this is the case then corporate taxes, if applied solely to companies over a certain market cap, would be almost entirely born by stock holders through reduced dividends. This would also helpfully offset the regulatory advantages large cap stocks have regarding access to capital.
Makes one wonder, which force is preventing an otherwise politically obvious effort to move all taxes onto business and other unpopular groups? Why is income taxation a thing at all?
Well, for one, there are still rich high income individuals (LeBron James, Tucker Carlson, …) and leftists want to tax them as well.
For another, if you changed taxation to be as you suggest, most corporations - including ALL private ones - wouldn’t make that much in profits, but employee compensation would go way up…
Even the relatively stupider leftists that are short of outright Communists understand you can’t just tax capital - which is what taxes on businesses mostly are - if you want the money for all of the various things leftists want government to spend taxpayer money on.
Whilst the detail of exactly how is business taxes matter, regardless of implementation you can't assume that a tax on business translates into a tax of profit/interest, this is the whole point of the article. The incidence will fall where the market will bear it to fall.
But it is true that corporations as a special case are mobile, and you can't tax them beyond the point at which they leave, whereas it's much harder to make people leave, so maybe that's why. Tax in business is as high as it can be without triggering a capital outflow.
“The higher price of the imports reduces American consumption.”
Maybe true in some cases, but not all…maybe not in most. Consuming things at a constant rate seems far more important to Americans, generally, than making careful decisions about what to buy or not buy based on changes in price.
The decision to purchase a given product is usually driven by a combination of many factors: habit, fashion, tribal signaling & identity, whim, convenience, and so on. I hypothesize that the more other factors play a role in the purchase decision, the more price may fluctuate without affecting it. Even one strong second factor can override price. Gas is almost $4 a gallon but people still wait in line to buy big pickup trucks, because they still need pickup trucks (or imagine they need them).
There is a family next door to me who, despite having working class jobs, keep getting more and more pets. (I think the adults in that house have trouble saying no to their kids.) Each pet requires food, vet visits, surgeries in some instances, etc. They’ve also had to have a fence installed around their yard for the dogs. If each pet and its accoutrements had been half or double the price, I doubt the total number of pets would be much different.
One more example: many of my coworkers purchase food daily from gas station convenience stores. Food there is 2, sometimes 3 or 4 times the price of buying the same thing at a grocery store. When the price of Monster Energy and Doritos or whatever goes up, they keep buying it.
If demand is inelastic, then the tax will be entirely paid by consumers, since importers can just raise prices. In your scenario its paid by consumers. However tarrifs also apply to intermediate goods- and in your scenario demand is more elastic there.
I thought I was fairly clear, but let me say it again...
Demand, it seems to me, is affected by lots of things, with price being only one (often negligible except on the margins) factor, and where price does affect demand it frequently isn't in the straightforward way David asserted.
That is not the same thing as saying "demand is not affected by price", which would be overly simplistic and incorrect.
Maybe just look up elasticity of demand because what you're saying is that demand is Inelastic. Of course if its perfectly Inelastic price has no impact.
I’m not an economist, just a guy who’s read what economists write and tried to pick up the lingo as best I could; it’s possible I am misunderstanding what the terms “elastic”/“inelastic” means, or whether “inelastic” necessarily means “perfectly inelastic”. If “inelastic” is the correct way to summarize what I was describing, without losing the nuance, then okay, though to me that seems like potentially misleading language.
But in either case, David didn’t use that term, and I was responding to him when he said “The higher price of the imports reduces American consumption.”
In addition to what dotyloykpot correctly describes re: the price elasticity issue, the other thing you miss is that additional money spent on the newly higher priced item (thanks to the tariff) reduces American consumption of other items in the economy because Americans now have less money to spend on other items in the economy.
The theoretical exception would be where American consumers *all* react by having the additional spending to cover the increased costs come entirely out of savings, but this is of course unlikely.
Now it is of course true that this additional factor is similar across all taxes on Americans.
That makes sense, but still doesn’t reflect what I see, which is that prices go up, while people continue to buy as much or more, not just of the pricier thing but of everything. The statement I was responding to was “The higher price of the imports reduces American consumption.”
What are Americans reducing consumption of? It ain’t food, it ain’t utilities, it ain’t medicine, it ain’t cars or gasoline or clothes or zero-turn mowers or cell phones or mobile pet spa services…where is this reduction in consumption?
Maybe it’s something less visible? Maybe Americans are saving less? Maybe they are drowning in debt? (I’ve heard that is a widespread issue.)
I am simply pointing to one apparently important part of David’s (probably most economists’) model that, as far as I can tell, frequently does not work the way they assume.
What I wonder is what fraction of the bad/naive answers propagated by the media are out of true ignorance, and how much out of tribal allegiance/agenda.
On this topic almost alone I’m inclined to believe it is mostly the former, whereas with most other topics of a political nature I’m quite confident that it is mostly the latter.
But most people get it with respect to cigarettes. The high taxes on cigs are designed to influence consumer behavior, not that of the corporation that writes the check.
Corporate tax, income tax paid be each and every body in the production-transport-sales chain, sales tax, sin tax , etc., gets to the point where I wonder if government gets 90%+ of every dollar.
Some years back visiting Russia's Wild Wild East, I found I could buy a pack of Camels for the equivalent of fourteen cents. At that time a pack, here in Alaska would cost over a buck fifty. I really don't believe R. J. Reynolds was selling to the Russians at a loss.
"I wonder if government gets 90%+ of every dollar."
Last time I checked was several years ago. Local, state, and federal spending was 40% of GDP. A trillion or two was borrowed, but I'd guess governments get 1/3 of all income / consumption / etc.
I recall someone doing an analysis some time ago finding that something akin to 30% of the price of a gallon of gas was state taxes. Don’t quote me on that number, but there are definitely studies on that sort of thing.
It's a way of paying for the roads, and not a bad one at that. Gasoline taxes cover about 75% of the cost of building and maintaining roads. After subtracting revenue from tolls, I wish the gasoline tax, would be raised to cover all of it.
Turns out, a lot of states redirect funds from gas taxes to other, non-road projects like trains. It isn't just a way of paying for the roads. It is possible that 75% of what is actually spent on roads comes from the gas taxes, but 75% of the gas taxes do not go to roads.
More to the point, we are talking about how much of productive income is taxed at various points.
Well, more cash goes to roads than the gas tax. Take a penny from the gas tax and put it somewhere other than roads, but get more pennies from someplace else to pay for the roads.
No, that's not the point. Gotta pay for the roads. Taxing gasoline is a great way of doing it.
Yes, high sin taxes are indeed designed to reduce consumption.
But they also harm the producers’ profits in terms of overall sales and probably also in terms of margins, since the producer is likely to reduce their sales price a bit in response to the tax.
And of course for most of the people who want high sin taxes this secondary effect is highly welcomed, even when it is not their primary purpose - stated or otherwise - for the tax.
Yes, it is a tax that consumers mostly pay and like any tax, it distorts choices.
But tariffs in general seem not as bad as payroll taxes which reduce incentive for working.
Better to reduce trade and increase employment.
Why do you expect a tariff to increase employment? It reduces both imports and exports — trade is trade. More employment in import-competing industries, less in export industries.
I have had several posts on the relevant economics. One of them: https://daviddfriedman.substack.com/p/ptolemaic-trade-theory
A tariff reduces the incentive to work too since it raises prices and the reason to work is to get money to buy things with.
The tariff would not increase employment by itself, but replacing payroll taxes with tariffs would likely increase employment.
But reducing trade distorts the economy, encouraging less efficient production at the expense of more efficient production.
As David's father said, IIRC, when a Chinese official bragged about all the construction workers using shovels and wheelbarrows so there would be more on the job, if that was their sole goal, why not use spoons?
Why not ban ATMs? Why not bring back elevator operators and telephone switchboards? Make self-service gas stations mandatory again.
I think it was India rather than China - if indeed any specific country - to which Friedman was referring, but the point is quite excellent.
Of course, the effects of distortion may be difficult to predict.
But moderate tariffs have been used before without the kind of extreme effects of your examples...
Another point is how the effect of US tariffs compares with VAT taxes on imported goods in Europe. They could be considered a hidden tariff.
The fact that another country has a tariff, hidden or not, is not a reason for the US to have one. Tariffs don't compensate for each other.
“ The fact that another country has a tariff, hidden or not, is not a reason for the US to have one.”
This is completely true.
However, the fact that other countries have tariffs on U.S. produced goods is a quite excellent reason for Trump to have used the leverage he clearly had to get those tariffs and NTBs reduced in so many countries.
Yet this aspect of the story is almost never mentioned by critics of tariffs.
If you’re gonna criticize Trump’s tariffs, it seems only fair to praise his clear demonstrated tariff-reduction efforts.
I ain’t a tariff expert by any means, but pretty sure he is responsible for more tariff reductions than anyone in the last 40+ years.
Yes, but for those looking for 'fairness', the recent agreement for 0% European tariffs on US goods compared to 10-15% US tariffs on European goods, considering the VAT may cause that to be somewhat 'fair'.
--I have learned that it is intellectual suicide to discuss international trade theory on the internet. I have broken my own vows to never do it again. For this, I deserve to be punished.
--Whenever someone uses the word "fair" my hands start shaking because I know he wants something from me.
Note that I wrote 'fair' in quotes.
I do not think it should decide much, but it does provide 'optics'.
The effects of distortions are easy to predict. That's why income tax law hides as much as it can!
No. VAT is collected on imports at the same rate as on domestic production. VAT is a pure consumption tax, whereas a tariff is a consumption tax with some of the revenue going to producers. VAT creates one distortion. A tariff creates two.
VAT is a most wonderful tax.
But saying the VAT effect is the same as on imports as domestic production assumes no taxes during production at US facilities, which is not the case.
So what.
How much distortion does it take before you deem it extreme? I did not use that word and I provided no examples.
And if the effects of distortion are difficult to predict, why did you predict tariff distortions are less than payroll tax distortions?
ETA: s/income/payroll
To raise the same amount of money, the tax % must be higher in a small market than a large market. Distortions are proportional to the square of the % take. So the same tax amount in a large market will have smaller distortions than in a small market. Employment is much larger than international trade, which is why most successful countries primarily rely on income tax.
That all said there's political considerations, national security, entrenched interests, regulatory issues, tax evasion, that can cause tarrifs to work relative to employment tax. However they start out far behind due to distortions.
Because the US is moving towards a gig economy, and income tax and vat is very hard to collect efficiently from gig workers, my opinion is tarrifs are going to become more significant.
Digging with spoons seemed an example to me, but I see you did not mean it that way.
Not being an economist, my predictions are only based on history.
What history?
US tariff rates around 20% in the late 1800s corresponded with the US growing to be the wealthiest nation in the world. They were the primary federal revenue source then.
Also, moderate tariffs in the 1950s corresponded with prosperity.
“But tariffs in general seem not as bad as payroll taxes which reduce incentive for working.”
For low to moderate tariffs on consumer goods, I’m inclined to agree with you.
For higher tariffs, or most any tariff on intermediate goods, I definitely do not agree with you, as the reduction in specialization, trade and comparative advantage is likely worse for aggregate wealth than payroll taxes which are relatively moderate, and which on the margin generally have fewer incentive distortions.
Unfortunately, facts and logic are pretty much in an angry divorce proceeding from politics.
People who say "Tax Corporate Profits" have zero understanding of Corporate accountancy, much less of why places like the Cayman Islands (Still? I don't keep up...) are popular legal homes for international concerns and least of all that a corporation is just a group of people....I'd wager nontrivial money they don't know that the DNC and RNC are corporations.
See also "excess profits tax," "tax on big oil/pharma/boogeyman of the week"...
Since I believe in what we pay because of government to be very transparent, we need to move away from our current income/payroll tax system to something that is more transparent to Americans. Anyone can look at a sales receipt and determine how much they paid in sales tax even it it is included in the price. For example, the FAIRtax rate would be 30%. If you checked out at the store and your bill is $130, you would know that $30 was the tax you paid the federal government.
Transparency is the fear of government and they prefer to hide the true costs of government.
I thought readers might be interested in this Substack post that explains the topsy-turvy world of Trumponomics, or as I call it Vendettanomics.
https://charles72f.substack.com/p/vendettanomics-trumps-war-on-econ
How about who gets the benefits? E.g. obviously a US tax on aluminium imports will benefit US aluminium producers and non-US aluminium consumers, but do we have any idea how those benefits are distributed?
Regarding corporate tax and elasticity of capital regarding dividends - for a variety of reasons passive index funds have an advantaged regulatory environment. These funds trade based on inflows/outflows and market capitalization rebalancing. Since no analysis is done on dividends, this has caused PE ratios to balloon due to reflexivity and reduced liquidity from active managers - basically the flows from passive overwhelm the capital access active fundamental managers have, preventing efficient reallocation (they can't sell because they already sold; they can't short because they will get margin called). If this is the case then corporate taxes, if applied solely to companies over a certain market cap, would be almost entirely born by stock holders through reduced dividends. This would also helpfully offset the regulatory advantages large cap stocks have regarding access to capital.
Makes one wonder, which force is preventing an otherwise politically obvious effort to move all taxes onto business and other unpopular groups? Why is income taxation a thing at all?
Well, for one, there are still rich high income individuals (LeBron James, Tucker Carlson, …) and leftists want to tax them as well.
For another, if you changed taxation to be as you suggest, most corporations - including ALL private ones - wouldn’t make that much in profits, but employee compensation would go way up…
Even the relatively stupider leftists that are short of outright Communists understand you can’t just tax capital - which is what taxes on businesses mostly are - if you want the money for all of the various things leftists want government to spend taxpayer money on.
Whilst the detail of exactly how is business taxes matter, regardless of implementation you can't assume that a tax on business translates into a tax of profit/interest, this is the whole point of the article. The incidence will fall where the market will bear it to fall.
But it is true that corporations as a special case are mobile, and you can't tax them beyond the point at which they leave, whereas it's much harder to make people leave, so maybe that's why. Tax in business is as high as it can be without triggering a capital outflow.
“Tax in [sic] business is as high as it can be without triggering a capital outflow.”
Perhaps that is the motto of the committed leftist.
A leftist who understands little of economics and incentives.
Surely it is not that of an economist. Nor someone who believes in freedom
“The higher price of the imports reduces American consumption.”
Maybe true in some cases, but not all…maybe not in most. Consuming things at a constant rate seems far more important to Americans, generally, than making careful decisions about what to buy or not buy based on changes in price.
The decision to purchase a given product is usually driven by a combination of many factors: habit, fashion, tribal signaling & identity, whim, convenience, and so on. I hypothesize that the more other factors play a role in the purchase decision, the more price may fluctuate without affecting it. Even one strong second factor can override price. Gas is almost $4 a gallon but people still wait in line to buy big pickup trucks, because they still need pickup trucks (or imagine they need them).
There is a family next door to me who, despite having working class jobs, keep getting more and more pets. (I think the adults in that house have trouble saying no to their kids.) Each pet requires food, vet visits, surgeries in some instances, etc. They’ve also had to have a fence installed around their yard for the dogs. If each pet and its accoutrements had been half or double the price, I doubt the total number of pets would be much different.
One more example: many of my coworkers purchase food daily from gas station convenience stores. Food there is 2, sometimes 3 or 4 times the price of buying the same thing at a grocery store. When the price of Monster Energy and Doritos or whatever goes up, they keep buying it.
How do you account for that?
If demand is inelastic, then the tax will be entirely paid by consumers, since importers can just raise prices. In your scenario its paid by consumers. However tarrifs also apply to intermediate goods- and in your scenario demand is more elastic there.
Why would demand be totally inelastic?
I am saying that, as far as I can tell, demand is not elastic in the straightforward way presented.
In your example you say demand isn't affected by price. Thats just a longer way to say demand is inelastic.
I thought I was fairly clear, but let me say it again...
Demand, it seems to me, is affected by lots of things, with price being only one (often negligible except on the margins) factor, and where price does affect demand it frequently isn't in the straightforward way David asserted.
That is not the same thing as saying "demand is not affected by price", which would be overly simplistic and incorrect.
Do you see the difference?
Maybe just look up elasticity of demand because what you're saying is that demand is Inelastic. Of course if its perfectly Inelastic price has no impact.
I’m not an economist, just a guy who’s read what economists write and tried to pick up the lingo as best I could; it’s possible I am misunderstanding what the terms “elastic”/“inelastic” means, or whether “inelastic” necessarily means “perfectly inelastic”. If “inelastic” is the correct way to summarize what I was describing, without losing the nuance, then okay, though to me that seems like potentially misleading language.
But in either case, David didn’t use that term, and I was responding to him when he said “The higher price of the imports reduces American consumption.”
In addition to what dotyloykpot correctly describes re: the price elasticity issue, the other thing you miss is that additional money spent on the newly higher priced item (thanks to the tariff) reduces American consumption of other items in the economy because Americans now have less money to spend on other items in the economy.
The theoretical exception would be where American consumers *all* react by having the additional spending to cover the increased costs come entirely out of savings, but this is of course unlikely.
Now it is of course true that this additional factor is similar across all taxes on Americans.
That makes sense, but still doesn’t reflect what I see, which is that prices go up, while people continue to buy as much or more, not just of the pricier thing but of everything. The statement I was responding to was “The higher price of the imports reduces American consumption.”
What are Americans reducing consumption of? It ain’t food, it ain’t utilities, it ain’t medicine, it ain’t cars or gasoline or clothes or zero-turn mowers or cell phones or mobile pet spa services…where is this reduction in consumption?
Maybe it’s something less visible? Maybe Americans are saving less? Maybe they are drowning in debt? (I’ve heard that is a widespread issue.)
They do it so long as they have income to do it. The rest tells us that you'd prefer a different consumption structure.
I am simply pointing to one apparently important part of David’s (probably most economists’) model that, as far as I can tell, frequently does not work the way they assume.
A particularly excellent piece.
What I wonder is what fraction of the bad/naive answers propagated by the media are out of true ignorance, and how much out of tribal allegiance/agenda.
On this topic almost alone I’m inclined to believe it is mostly the former, whereas with most other topics of a political nature I’m quite confident that it is mostly the latter.
I'm inclined to believe its both. If one is stupid and uneducated one can be made to believe anything.
I had reason to investigate French taxes a few months ago.
The VAT is 20% by itself, employer payroll taxes are 45%, and income taxes are 30-40%.
So the mean, by income, French citizen pays 105% of his income unless he saves one hell of a lot. This is an overestimate, even for France. :-)
No you have the math wrong, and Chartertopia has it basically correct.
I used ChatGPT to help me crunch the numbers and it comes out to something like 65% on the margin, not 105%.
Which is what I said.
No. The employer's 45% is income the employee never sees, same as the US's 7.65% half of the FICA tax that the employer pays.
The total payroll cost to the employer is 145% of what the employee sees. The employee pays 30-40% income tax, plus purchases include 20% VAT.
Suppose the employee signs on for €100,000. The employee pays €30-40,000 income tax. The employer pays €45,000 payroll tax.
At the midpoint, the employee cost the employer €145,000 of which €80,000 (55%) goes to the government.
But in terms of marginal tax rate, for each additional € paid by the employer for the employee, the marginal rate is something like 65%
Thank you for caring :-)
I don't care.
But most people get it with respect to cigarettes. The high taxes on cigs are designed to influence consumer behavior, not that of the corporation that writes the check.
Corporate tax, income tax paid be each and every body in the production-transport-sales chain, sales tax, sin tax , etc., gets to the point where I wonder if government gets 90%+ of every dollar.
Some years back visiting Russia's Wild Wild East, I found I could buy a pack of Camels for the equivalent of fourteen cents. At that time a pack, here in Alaska would cost over a buck fifty. I really don't believe R. J. Reynolds was selling to the Russians at a loss.
"I wonder if government gets 90%+ of every dollar."
Last time I checked was several years ago. Local, state, and federal spending was 40% of GDP. A trillion or two was borrowed, but I'd guess governments get 1/3 of all income / consumption / etc.
I recall someone doing an analysis some time ago finding that something akin to 30% of the price of a gallon of gas was state taxes. Don’t quote me on that number, but there are definitely studies on that sort of thing.
It's a way of paying for the roads, and not a bad one at that. Gasoline taxes cover about 75% of the cost of building and maintaining roads. After subtracting revenue from tolls, I wish the gasoline tax, would be raised to cover all of it.
Turns out, a lot of states redirect funds from gas taxes to other, non-road projects like trains. It isn't just a way of paying for the roads. It is possible that 75% of what is actually spent on roads comes from the gas taxes, but 75% of the gas taxes do not go to roads.
More to the point, we are talking about how much of productive income is taxed at various points.
Well, more cash goes to roads than the gas tax. Take a penny from the gas tax and put it somewhere other than roads, but get more pennies from someplace else to pay for the roads.
No, that's not the point. Gotta pay for the roads. Taxing gasoline is a great way of doing it.
“…I wish the gasoline tax, would be raised to cover all of it.”
But maybe kinda tough in an era of ever- increasing electric vehicles.
No worries. Soon those electric vehicles will be gone!
Yes, high sin taxes are indeed designed to reduce consumption.
But they also harm the producers’ profits in terms of overall sales and probably also in terms of margins, since the producer is likely to reduce their sales price a bit in response to the tax.
And of course for most of the people who want high sin taxes this secondary effect is highly welcomed, even when it is not their primary purpose - stated or otherwise - for the tax.