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by ajmurmann 437 days ago
It's worse than a sales tax. Tariffs have a few market-distorting effects that a sales tax doesn't.

* Domestic consumers and companies are incentivized to potentially go for the 2nd best product. This over time can impact productivity as the tooling will decline over time as inferior solutions are bought.

* Reduced competition. We've seen this with the 25% "chicken tax" on pickup trucks. Arguably one culprit in US automakers falling behind is that they had a protected market around pickup trucks where it was hard to impossible for foreign competition to keep them on their toes. So US automakers retreated more and more into this safe haven.

* Destruction of economies of scale: If everyone wants the entire supply chain to be replicated in their country, we obviously loose economies of scale and thus efficiency. This sounds like it would be small but having multiple Shenzhen's is just not viable and we'll have to deal with higher prices and less product choice.

* Galapagos island syndrome: Over time separation of markets can lead to incompatible technologies which amplifies all other points.
1 comments
lostlogin 437 days ago
> Tariffs have a few market-distorting effects that a sales tax doesn't.

There are still stupid edge cases. The cake-versus-biscuit saga in the UK comes to mind.

https://en.m.wikipedia.org/wiki/Jaffa_Cakes

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ajmurmann 437 days ago
Just double checking, you are saying reduced competition and scale economics are "stupid edge cases"?
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lostlogin 437 days ago
I’m saying that using a courtroom to decide the definition of a biscuit indicates a problem with sales tax legislation.

Flat rate sales tax has its problems, but avoiding Jaffa cake situations is entirely desirable.

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ajmurmann 437 days ago
Agreed, complex policies open the door for unintended consequences and have higher enforcement cost. If you do a sales tax or VAT it should be flat. If anyone thinks that it will be regressive or put poor people at a disadvantage, the answer IMO is UBI, even a small one can make up for sales tax on food while avoiding the deadweight loss from nonsense like that Jaffa cake nonsense.
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