Did you know that (at the time of writing) 75 percent of the total burden of US tariffs falls on clothing? Or that 66 percent of this burden falls on women’s clothing? It’s not just because women buy more clothes than men; it’s also because the U.S. government has purposefully set higher tariffs on women’s clothing (15.1 percent) than on men’s clothing (11.9 percent). That’s one of the many interesting nuggets you’ll find in Scott Hodge’s important new book. Taxocracy.
Before reading the book, I knew a lot about the American tax system. Now I know much, much more. From 2000 to 2022, Hodge served as president and CEO of the Tax Foundation, based in Washington, DC. You don’t have to read much of that foundation’s work to suspect that the professionals who work there aren’t big fans of taxation; You don’t have to read much to realize that they know their subject and report on it honestly. Hodge’s book fits into that tradition. He takes into account the many ways in which taxes distort our behavior and make us worse off, not just because they take our money, but also because of ‘deadweight loss’ – the loss of profit to consumers and producers because exchanges go wrong due to the higher prices resulting from taxes.
These are the first two paragraphs of my recent book review “Taxocracy: What You Don’t Know About Taxes and How They Shape Your Daily Life,” RegulationWinter 2024-25.
Another excerpt:
Consider so-called sin taxes, taxes that governments impose on things that some government officials and some voters disapprove of. Any economist can tell you that such taxes will change people’s behavior. Hodge goes further and shows how specific sin taxes have done this. For example, he notes that hard seltzer – carbonated water that contains alcohol – is “one of the fastest growing beverage classes in the US.” Why? Because taxes on brewed beverages are much lower than taxes on spirits. Are hard seltzers brewed? Yes. Hodge explains that the manufacturers have discovered how to brew sugar to make their products.
Consider Norway’s high sugar tax, which, Hodge writes, “has created a booming candy industry… in Sweden.” Or, closer to home, New York, where high cigarette taxes have led to more than 50 percent of cigarettes smoked in the state coming from smugglers.
Read the entire review and you learn a fair amount. Better yet, read the whole book and you learn even more.
I saw Scott give a talk at the Stanford Institute for Economic Policy Research a few years ago and was impressed. That’s why I asked him to write an updated article on corporate tax for me Concise encyclopedia of economics.. It’s here.