"The same applies for the 'underground economy' except now they can avoid these taxes altogether by purchasing on the blackmarket."
Just what types of consumer products do you think will be sold in mass on the black market - houses, cars, groceries, furniture? Help me out here, YN.
Just what types of consumer products do you think will be sold in mass on the black market - houses, cars, groceries, furniture?Sure. Whatever can be evaded, will be to some degree. Like I asked before, why do you think the blackmarket for cigarettes is greated that the blackmarket for candybars?
When governments try to extract tax revenue from the economy, they foster an array of responses from citizens who have an economic incentive to avoid the tax. Higher tax rates create even greater incentives for avoidance, evasion, and black-market activity. New York City's experience with cigarette taxes vividly illustrates these problems. New York's high cigarette taxes have spawned a massive black market that has diverted billions of dollars from legitimate businesses and governments to criminals. More troubling than the financial losses is the crime associated with the city's illicit cigarette market. The enormous profits that can be made smuggling cigarettes into New York have lured smalltime crooks, mobsters, street gangs, and terrorists into the racket. Those criminals have engaged in a host of violent activities, including murder, kidnapping, and armed robbery, to earn and protect their illicit profits. Such crime has frustrated law enforcement efforts to curtail it and exposed regular citizens, such as truck drivers and retail store clerks, to violence. The failure of New York policymakers to consider the broader effects of high cigarette taxes has been a mistake repeated across the country in the stampede to maximize taxes on this demonized product. Too often, policymakers do not consider those effects in the erroneous belief that people do not respond to government-created economic incentives. The negative side effects of high cigarette taxes in New York provide a cautionary tale that high tax rates have serious consequences even for such a politically unpopular product as cigarettes. |