An intrepid Seattle Times reporter investigates the price effects of a proposed (by a democrat!) porn tax in Washington State by going to the Deja Vu store at 9 AM.
Too bad Nicole did not call one of my public finance colleagues, who could have explained to her that optimal taxation is all about elasticities of demand. Putting aside taxes whose point is to change behavior rather than raise revenue, such as cigarette taxes, you want to tax things with inelastic (not responsive to price) demand so that you do not change behavior. This minimizes the tax-induced distortions to individual choice.
I have no idea what the elasticity of demand might be for the products sold at the Deja Vu store (or the neighboring Deja Vu "club").
Who was my favorite student this term?
1 year ago