Tax Oddities
Economics E. Napp
1-A toupee! A toupee is a wig or hairpiece to cover a bald spot. Some toupees are exempt from some states’ Sales Tax! Yes, in Maryland the hairpiece industry lobbied for, and received, a special exemption from the state sales tax. There was no economic justification for the exemption. There was no moral justification for it. Ah, but the toupee-makers applied political pressure. This teaches us that allowing special exemptions to a tax is a bad idea, because every special interest winds up lobbying for its own special treatment.
2-Slavery is a great evil, but it could be even worse – the government could penalize people for setting their slaves free. In the Roman Empire, a slaveholder had to pay a tax for setting his slave free. This tax was a manumission or freedom tax. The slaveholder had to pay the government between 2 to 5 percent of each slave’s value.
3-A house with no windows is unpleasant. People who lived in these houses were more likely to get diseases and die due to the lack of light and ventilation.
So why did anyone live in such houses, thousands of them, in many locations in Western and Central Europe? Because someone decided to impose a tax on windows! One can still find some window-tax houses standing today. Remember: people react to taxes; they don't just pay them automatically! Fancy monarchs and highly-trained bureaucrats failed to realize that window taxes meant fewer windows. Don't ever make that kind of mistake.
4-Pasha Mehemet Ali decreed a tax on all date trees. Just like a plague, the tax caused trees to fall. With the tax, they were worth more dead than alive.
Questions:
1-What does it mean when a good or service is exempt from taxation? ______
2-What is a sales tax? ______
3-Why are toupees exempt from the sales tax in Maryland? ______
4-What effect do you think the manumission tax had on slaves in the ancient Roman Empire? ______
5-Why were some houses built without windows if windows are beneficial? ______
6-How did Pasha Mehemet Ali’s tax on date trees affect the supply of dates? ______
More Tax Oddities:
1-The government of Sparta in ancient Greece declared that everyone, including slaves and cattle, had to fast (not consume food or drink) for one day and then pay a tax of 100% of the food that they WOULD HAVE consumed.
2-One Chinese dynasty levied (to impose or collect a tax) a produce tax on farmers depending on how far their lived from the Chinese capital. Farmers living near the capital paid 5% of their produce to the government. Farmers living far from the capital paid 25% of their produce to the government.As strange as it seems, this idea does reappear from time to time -- one of British Prime Minister Margaret Thatcher's failed policies would have shifted property tax burdens off the London area and onto more distant regions.
3-What do you do if you're a merchant in Rome and you get fed up with all the taxes on your commerce? Simple -- stop keeping records. During the third century, civilization fell backward as businesspeople actually stopped keeping paper records in a fairly successful effort to evade taxation.
Questions:
1-What was the Spartan “fast” tax? ______
2-How did the Chinese tax farmers differently? Have other nations considered this tax policy? ______
3-Why did some Roman merchants stop keeping business records? ______
What is the Best Tax Policy?
A tax is a required payment to a government. Taxation allows governments to fund defense programs, education programs, and social security programs. Taxation is necessary for the proper functioning of a government. Yet not all tax policies are fair or just or reasonable. So, how do we determine which tax policy is best for a nation. First, we must consider our values. Our values will determine our tax policy.
Answer the following questions to help you understand your values and goals regarding taxation:
Should government budgets always be balanced? ______
Should sport stadiums be built with tax dollars? ______
Should rich people pay higher taxes? ______
Should all people pay the same percentage of income as tax to the government? ______
Should the government provide aid to the elderly, the disabled, and the orphaned? ______
Should goods and services be taxed? ______
Should environmentally conscious businesses pay less money in taxes? ______
Should healthy and fit people pay less in taxes? ______
Should smokers pay higher taxes? ______
These are just a few questions we could ask ourselves helping us determine what our values and goals are for our country.
Three Types of Tax Policies:
- A progressive tax is a tax where the more people earn the greater the proportion of a person’s income will be paid to the government. The more you make the more you pay.
- A Regressive taxis a tax that represents a smaller proportion of a person's income as their income rises. In other words, the more you make, the less you pay.
- A Proportional tax is a tax where the percentage of income paid in taxation always stays the same. It is commonly called a “flat tax.”
Questions to Ponder:
1-Why is a sales tax a regressive tax? ______
2-Our Federal Income Tax is a progressive tax. So, who pays more to the government in the United States and why? ______
3-Some people say that a flat tax is the fairest of all taxes. Why? ______
4-Which system of taxation do you think is best for our government? Why? ______
Finally, let’s consider what we are personally willing to pay for. Look at the list below and determine whether you feel that the government is responsible for providing these services. For every service, please cite the reason for your conclusion.
National Defense: Yes or No
Why? ______
Roads: Yes or No
Why? ______
Health Insurance for the Elderly, Disabled, and Poor: Yes or No
Why? ______
Health Insurance for Everyone: Yes or No
Why? ______
Education: Yes or No
Why? ______
Environmental Preservation: Yes or No
Why? ______
Law and Order: Yes or No
Why? ______