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18 - The art of taxation consist of so plucking the goose...

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The art of taxation consist of so plucking the goose to obtain the greatest amount of feathers with the least amount of hissing. - Colbert, Finance Minister to Louis XIV Late 1700’s “Distortional taxes” reduce efficiency. Colbert recognized that we need taxes to fund public items like schools, roads, police, armies. And that this has an effect on net economic surplus. Mankiw Principles: #3. Rational people think at the margin. #4 People respond to incentives.
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0.00 0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00 2.25 2.50 0 25 50 75 100 125 Million kL per Quarter Price $AU per kL Marginal (Private) Cost Marginal Benefit Marginal Private Cost = Marginal Benefit ( MPC = MB =0.75, Q=75)) No Externality ( Mankiw #3: Rational people think at the margin) (AKA Supply = Demand )
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