Freeman

ARTICLE

Bumper-Sticker Economics

JULY 01, 1988 by T. NORMAN VAN COTT, CECIL E. BOHANON

Professors Bohanon and Van Cott teach in the Department of Economics at Ball State University, Muncie, Indiana.

Economics is alive but not well on highways. Americans are continually instructed in the nuances of economics via a plethora of bumper stickers of questionable content. Some mobile placards thinly veil people’s attempts to increase their incomes by duping others. The United Auto Workers’ ludicrous claim that buying a foreign car dooms ten assembly-line workers to a lifetime of unemployment is such a sticker. Other drivers carry the torch for causes ranging all the way from the National Rifle Association’s “God, guts, and guns” theory of American economic development to left-liberal pleas to produce food “for people, not for profit.”

In this wasteland of economic illiteracy, we have found one sticker that offers more than mere comic relief. America’s truck owners, no doubt tired of hearing that their trucks mangle the roads, have retaliated with stickers stating, “This Truck Pays Umpteen Thousand Dollars in Annual Road-Use Taxes.” Contrary to others, there is a seed of economic truth in this sticker. The message describes the user-cost mechanism in U.S. highway finance, however imperfect the mechanism may be.

At the same time, this back-of-the-truck tax return illustrates a widespread myth about taxes—a myth that is responsible in part for the sorry condition of public discussion of tax policy. Let us sketch this myth, using as a backdrop the American trackers’ attempt at economic education.

The Myth

The myth is that inanimate objects—like trucks—pay taxes. The truth, of course, is that inanimate objects never pay taxes, only people pay taxes. We enjoy pointing out to our students that when we pay our car license fees at the motor vehicles office, we never wait in line behind tracks. We wait behind people who own trucks. People pay every tax—be it a truck tax, land tax, corporate profit tax, wealth tax, or any other business tax.

One might think that we are belaboring the obvious, if not being simplistic, to point out that only people pay taxes. Note, however, that politicians across the political spectrum continually draw a distinction between taxes levied “on the people” and taxes levied “on business:” The distinction is utterly fallacious. The people who own businesses are legally responsible to pay business taxes.

Nevertheless, politicians of all stripes find it appealing to perpetuate the “people vs. business” tax illusion. By convincing the electorate that people escape “business taxes,” it is easier to increase these taxes. Politicians, thereby armed with additional tax revenue, cansell classic “free lunches”—new government programs that no one seems to pay for.

A variant of this myth is that the legal responsibility for paying taxes is the same as the economic responsibility. Tax laws specify who is legally responsible for remitting tax revenues to the government. However, just because truck owners are legally responsible for paying road-use taxes does not mean they are the ones who actually pay them.

Road-use taxes increase costs for trucking companies, and these costs tend to translate into higher freight rates. This means that consumers of trucking services “share” in the burden of the tax. Likewise, to the extent road-use taxes negatively impact on the size of the trucking industry, truck drivers and truck manufacturers “participate” in the tax through lower earnings. The precise apportionment of the tax depends on what economists call the supply-demand conditions of the industry, but what is obvious is that actual tax burdens can be very different’ from legal tax burdens.

Conclusion

Truck owners can help demythologize taxation while still venting theft anger. May we suggest a sticker along the following lines: “Look Straight into Your Rear-View Mirror, Buddy, and You’ll See Who’s Really Paying Some of the Umpteen Thousand Dollars This Truck Owner Pays in Road-Use Taxes.”

ASSOCIATED ISSUE

July 1988

comments powered by Disqus

EMAIL UPDATES

* indicates required
Sign me up for...

CURRENT ISSUE

September 2014

For centuries, hierarchical models dominated human organizations. Kings, warlords, and emperors could rally groups--but also oppress them. Non-hierarchical forms of organization, though, are increasingly defining our lives. It's no secret how this shift has benefited out social lives, including dating, and it's becoming more commonplace even in the corporate world. But it has also now come even to organizations bent on domination rather than human flourishing, as the Islamic State shows. If even destructive groups rely on this form of entrepreneurial organization, then hierarchy's time could truly be coming to an end.
Download Free PDF

PAST ISSUES

SUBSCRIBE

RENEW YOUR SUBSCRIPTION