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Spring 2011

ISSN 0890-913X

Volume 26, Number 2

Categories: Economics | Spring 2011

On Rothbard on the Shifting and Incidence of a General Sales Tax: A Critique

William Barnett, Loyola University New Orleans

Walter E. Block, Loyola University New Orleans

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TheJournalofPrivateEnterprise26(2),2011,117-126OnRothbardontheShiftingandIncidenceofaGeneralSalesTax:ACritiqueWilliamBarnettIILoyolaUniversityNewOrleansWalterE.BlockLoyolaUniversityNewOrleansAbstractRothbardtakesthepositionthatageneralsalestaxcannotbeshiftedforwardontoconsumers.Inhisview,costsofproduction,ofwhichataxisaninstance,cannotdetermineprice.Rather,thecausationisintheotherdirection:Thepricesofcapitalandintermediategoodsarederivedfromthevalueofthefinalorconsumergoodsthattheycreate.Incontrast,wetakethepositionthatthecausaleffectsrunnotinonlyonebutinbothdirections.JELCodes:H22Keywords:Costsofproduction;Taxshifting;Taxincidence;Deriveddemand;Costpushinflation;MonetarismI.IntroductionWhobearstheburdenofsalestaxes?Isittheproducer,theconsumer,orsomecombinationofthetwo?Thetraditional,mainstream,neoclassicalanalysisoftaxshiftingandincidencereliesontheelasticitiesofdemandandsupplycurves.Here,taxescanbeshiftedforwardontoconsumers,dependingupontheseelasticities.Thetraditional,mainstreamAustrianview,1insharpcontrast,undertheleadershipofRothbard(2004),drawstheoppositeconclusion.Elasticitiesplaynorolewhatsoever,andforthisauthorandthosewhohavefollowedhimonthismatter,itisapraxeologicalcertaintythattheincidenceoftaxescannotbeshiftedinaforwarddirection.ThepresentauthorsalsowritefromanAustrianperspective,butofferacriticismofthisanalysis.WedemonstratethatRothbardisincorrectinthattheimpositionofageneralsalestaxaltersthe1Weconfesstoagreatpartialitytothisphrase.117

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Metadata [hide]

Title	On Rothbard on the Shifting and Incidence of a General Sales Tax: A Critique
Authors/Creators:	William Barnett, Loyola University New Orleans Walter E. Block, Loyola University New Orleans
Year:	2011
Volume:	26
Number:	2
Pages:	117 - 126
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	Rothbard, Sales tax, Costs of production, Tax shifting, Tax incidence, Derived demand, Monetarism, Cost push inflation

Citation:
Barnett, William; Block, Walter E. / 2011. "On Rothbard on the Shifting and Incidence of a General Sales Tax: A Critique." The Journal of Private Enterprise, 26(2): 117-126.