Arnold Kling

Deadweight Loss

Arnold Kling, Great Questions of Economics
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Duane Freese makes an eloquent case for tax simplification. He says that if you add up the total amount of work spent on tax compliance, it amounts to

The equivalent of 2,774,000 [full-time workers]...

That is more than the total civilian employment of the federal government. It is twice the active duty military force we have available to protect our shores and fight our wars. It is three times the number of police officers we have going after crooks.

What Freese refers to is one component of what economists call deadweight loss. Deadweight loss is the amount that taxes cost the public that is in excess of the revenue collected by the government.

Discussion Question. Apart from compliance costs, how else do taxes impose deadweight loss?

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