Do taxes make us poorer? In this video, Eamonn Butler, Director of the Adam Smith Institute, explores the complex impact of taxation on individuals, businesses, and the economy as a whole. We delve into two crucial concepts: the impact of taxes, which refers to how they affect behaviour, and the incidence of taxes, which determines who ultimately bears the economic burden. By examining factors such as elasticity of demand and supply, work incentives, and market conditions, we uncover the often unexpected consequences of tax policies.

The explainer highlights how taxes can influence consumer choices, work habits, and business decisions. It reveals that the true cost of taxation isn’t always borne by those who physically pay the tax. For instance, corporate taxes, often assumed to affect wealthy shareholders, may actually impact workers through lower wages. Understanding these nuances is essential for policymakers aiming to create a fair and efficient tax system.

To gain a deeper understanding of taxation and its effects on economic performance, check out Eamonn Butler’s new book, An Introduction to Taxation. This comprehensive primer, available for download from the Institute of Economic Affairs website, offers valuable insights into the complexities of tax policy and its far-reaching implications for society.