The Fallacy of Ignoring the Impact of Taxes on Incentives from "summary" of Economics in One Lesson by Henry Hazlitt
In discussing the fallacy of ignoring the impact of taxes on incentives, it is crucial to understand the fundamental principle that individuals respond to incentives. This principle lies at the heart of economic analysis and cannot be overlooked when considering the effects of taxation. When taxes are imposed on certain activities, individuals are naturally inclined to alter their behavior in response. Higher taxes on income, for example, may lead individuals to work less or seek ways to avoid paying taxes through legal or illegal means. This change in behavior is a direct result of the altered incentives created by taxation. Furthermore, the impact ...
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