{"id":1064,"date":"2007-01-22T15:02:56","date_gmt":"2007-01-22T04:02:56","guid":{"rendered":"http:\/\/maddruid.com\/?p=1064"},"modified":"2010-02-21T04:37:17","modified_gmt":"2010-02-20T17:37:17","slug":"1060-of-tax-reduction-not-subsidy-increase-please","status":"publish","type":"post","link":"https:\/\/maddruid.com\/?p=1064","title":{"rendered":"[1060] Of tax reduction, not subsidy increase please!"},"content":{"rendered":"<p>Crude oil prices have been falling lately and certain quarters are calling for the reduction of fuel prices in Malaysia. That call includes implicit demand for increase in subsidy. <a href=\"https:\/\/maddruid.com\/?p=985\">Anwar Ibrahim<\/a> is one of them.<\/p>\n<p>I oppose any subsidy increase that distorts the market. In fact, to combat externalities caused by fossil fuel consumption, I advocate the imposition of tax to internalize the externalities. Unfortunately, taxation is politically unpalatable. As an alternative to subsidy increase or taxation, I propose a policy better than subsidy increase as well as pragmatic at the same time; a third way \u2014 a proportionate decrease in taxes.<\/p>\n<p>That means any saving made by the government through the reduction of subsidy as well as the fall in crude oil prices should be fully used to fund tax cut across the board.<\/p>\n<p>The term saving here needs to be defined. Saving means the amount would need to be paid by the government for subsidy if crude oil prices had not fallen from the price level when the latest subsidy regime was announced.<\/p>\n<p>Why is this policy better than the call to increase subsidy?<\/p>\n<p>This policy is less distortionary. Not only it does not increase distortion caused by subsidy, it also reduces distortion caused by taxation through tax reduction. Apart from economic consideration, tax reduction might have favorable impact comparable to the political effect of subsidy increase effect \u2014 it would please the mob, for better or for worse.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Crude oil prices have been falling lately and certain quarters are calling for the reduction of fuel prices in Malaysia. That call includes implicit demand for increase in subsidy. Anwar Ibrahim is one of them. I oppose any subsidy increase that distorts the market. In fact, to combat externalities caused by fossil fuel consumption, I [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[107,42],"class_list":["post-1064","post","type-post","status-publish","format-standard","hentry","category-economics","tag-fuel-subsidies","tag-tax-cuts"],"_links":{"self":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts\/1064","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1064"}],"version-history":[{"count":1,"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts\/1064\/revisions"}],"predecessor-version":[{"id":6214,"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts\/1064\/revisions\/6214"}],"wp:attachment":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1064"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1064"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1064"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}