re: #434 Obdicut

Taxation can definitely alter or shift behavior, typically to engage in tax avoidance at all costs. That includes engaging in activities that would try to minimize tax hits.

That’s why the health care proposals include tax penalties for not obtaining health insurance; the thinking is that if you penalize something enough, people will engage in a behavior that the government would rather see.

That’s the thinking behind raising sin taxes and raising gas taxes.

The problem is that raising those taxes sometimes results in less revenue over time as people switch to more efficient vehicles, stop smoking, or engage in other behaviors of their own violition for wholly separate reasons (driving more efficient vehicles would occur over time as cars become more efficient technologically even without government interference - or can produce more horsepower with the same fuel requirements).

Buying more efficient cars results is less revenue over time for the government unless they continue to raise taxes, or find other things to tax.

Instead of taxing to produce results, making ultra efficient items tax exempt is a better strategy. It’s an incentive to productivity, and if you’re not relying on tax revenue, you can spur development and growth in an area without worrying about a revenue decline as the behavior you hope to achieve comes about.

That’s why so many states are now looking at mileage tax instead of gas taxes; they can’t make up the revenue lost as more people buy a Prius instead of a SUV - both will drive the roads, but if you tax mileage, you get revenue from both.