[village-idiot]

Consumption taxes on luxury goods usually aren’t very distorting at the local level, especially since its pretty easy to define luxury goods that aren’t locally made. The problem is that the max revenue that they can collect is much lower than income or common consumption taxes, which have a wider base with less ability to evade.

[Nasrudith]

Of course with luxury taxes the issue is avoidance more than evasion.

Sales based taxes are either regressive because it cannot be done without and are more or less fixed or avoidable because it can be done without.

Of course if reduced consumption of the given luxury is the goal it is sorta mission accomplished (too high and black markets may arise) but undermines the revenue generation goal.

[village-idiot]

I figured the goal was revenue, hence my dismissal of it as an effective tax for funding public services.

What’s the difference between avoidance and evasion with regards to taxation?

[graeme]

Evasion is illegal. i.e. not paying your income taxes

Avoidance is legal. i.e. if there was a local luxury goods tax, you could decide to either:

1. Not buy luxury goods, or

2. Buy luxury goods from some other area, without a tax

A local luxury goods tax would be highly likely to destroy the local luxury goods industry without actually lowering luxury good consumption, as such a tax can easily and legally be avoided.

Whereas, local property taxes can only be avoided by moving or selling. They can, however, illegally be evaded through fraud. This is why property taxes are more effective for cities: hard to avoid, hard to evade, and evasion can be punished with fines or jail.