Monday, April 02, 2012

Argumentum ad confusion #743

"... Because a rich person pays more tax, he/she deserves for receiving higher fuel subsidy than what a poor person receives..."

This argument came up to justify a very disturbing fact that more than 40 % of fuel subsidy in Indonesia is received by top 10% of the riches..

But, isn't this line of argument crazy? You don't pay tax as one-on-one payment for subsidy you get. Tax is to finance public goods production -- goods/services you can not exclusively consume and would not decrease if other also consumes, so that market price (supply and demand) will produce below optimum quantity.

Does gasoline falls into the category of non-excludables and non-rivalrous goods? Hell, no.

Even more puzzling to me, the other purpose of tax is actually to reduce consumption/production -- because there are some goods/services that produces negative externalities to the bystanders, like pollution.

How come then paying tax justifies for more consumption?

This is really an upside-down logic fueled by lack of very basic economics, which brings me to a question: when you complain (in twitter, facebook, on TV, and on the street) about tax and subsidy, do you really understand what you're talking about?