Sunday, March 26, 2006

A taxing situation

Taxes can create strange incentives and strange incidents. Take Bruintjes family in Holland as an example. They own a novelty doorbell. You push their doorbell and it barks like a dog. But Holland has a dog tax. And they send inspectors out to spy on people for owning dogs with paying the tax. One such inspector came to the house and rang the doorbell. Bark! Bark!

The inspector, apparently unable to tell the difference, writes out a fine and pushes it through the mail slot. It happened last year as well and Mrs. Bruintjes arrived home a few minutes later and was able to find the inspector down the road and bring him back to verify it was only a doorbell. Now they are trying to convince the bureaucrats that they are being taxed for a doorbell.

By the way if you wonder why architecture in Amsterdam is so irrational and uncomfortable blame it on the tax man. Houses there are notorious for being narrow, long and tall with these almost inhuman staircases that are so steep it is like climbing a ladder. One house is only door width at the front but widens at the back. Why so odd? Houses used to be taxed on their width not their size. So buiding it narrow made it cheaper but to make up for it they built them long and tall.

Every tax distorts human action. If you want to stop people from building normal width homes tax the width and people will respond by doing what the Dutch did. So what it is that government is wanting to stop when it taxes investments, employment, etc?

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