9 August 2024

Tax Behavior, Not People

Economists focus on what behavior gets taxed. Means-tested benefits have the following effects:

• they penalize low-income people who work — they lose eligibility as they earn incomes
• they penalize low-income people for getting married
• the payroll tax penalizes employment
• the corporate income tax and other forms of capital taxation penalize thrift
• the income tax penalizes risk-taking in investment

If your goal is to see people punished for working, getting married, saving, and undertaking risky investments, then you should love our tax system.

When you realize that what gets taxed is behavior, you'll want to tax behavior that you would like to discourage.

Rephrased for clarity.

Source: Arnold Kling