Fascinating stuff there. It looks a bit more complex than simply stating that higher taxes are always bad.
Is it genuinely your understanding that the entirety of my point is that higher taxes are always bad, or did you intentionally introduce this strawman?
But my point holds, just because smokes and booze are being taxed is not stopping their use or manufacture.
No one argued that taxes stop the transaction, so how exactly does your point hold?
Under which scenario do more cigarettes sell?
1. A total price including taxes of $5 per pack.
or
2. A total price including taxes of $2 per pack.
And just because someone gets taxed 35% does not mean he's discouraged to produce. Can you honestly think of a single example in which someone chose to not make more money in order to stay in a lower tax bracket?
Of course.
Let's say a man makes $25 per hour. He is a normal man with hobbies and a family, and wants the spare time to devote to each. He recognises a need to make a living, and diverts some of his time to earning a living. He values his time at $20, and will perform work that nets him more than that.
If he is taxed at a marginal rate of 15%, he can work a full 2000 hours a year, and still have an adequate incentive to work all 2000 hours, since the 2000th hour still nets him $21.25.
Let's say that the marginal rate for income beyond $50,000 per annum is 35%. Our man's 2001st hour now nets only $16.25. Since it would pay less than his valuation of his own time, he will optimise his return on his efforts and work only 2000 per year.
The wealth that would have been created by his 2001st hour and each hour thereafter will never be created. The 35% marginal income tax rate won't even be paid, but the threat of this level of confiscation will discourage the man from further productivity.