The Problem With Taxes -- Unintended Consequences

I've always loved folks who propose new taxes and assume that their proposal will make no difference when applied. The Las Vegas Review-Journal gives an example of just such a case in Nevada.

State Senate Minority Leader Dina Titus, D-Las Vegas, Sen. Randolph Townsend, R-Reno, and Sen. Bob Beers, R-Las Vegas, now want to repeal all or most of a live entertainment tax adopted during the rush to cobble together the state's biggest tax hike, back in 2003.

The tax was intended to grab $57 million a year from strip-tease joints, but has instead driven small-time local musical groups out of business while netting the state only a paltry $8.7 million per year.

What happened? Why was there a problem?

It's the darnedest thing. Turns out lawyers have trouble coming up with a way to differentiate between "wholesome small-time family entertainment" and topless dancers that will pass some tedious constitutional test that still says all taxes are supposed to be, you know ... evenly applied.

"It has become a bookkeeping nightmare. ... We created something so complicated that you can't figure out who has to pay," Ms. Titus now admits. "We didn't want to get hula dancers and piano players."

Please note, in passing, the verb of choice. "Get."

But rather than figuring out what their new law really said and meant before enacting it, the Carson City sausagemakers simply left it to the bureaucrats of the state Tax Commission to figure out what the heck they'd voted for.

And even after mariachi bands and piano players and hula girls were (apparently, supposedly) exempted, restaurants have been reluctant to take a chance on engaging them and possibly owing the tax, explains Daniel Dew.

The piece goes on to point out that this is exactly what is predicted by Von Mises' Law -- one government intervention in the market must lead to another and another -- as the Nevada legislature sets out to fix the problem that it created in the first place by imposing the tax.