Tax Relief by Mistake

Does ignorance of basic economics ever do any good? Maybe so.
When New Mexico repealed its gross receipts tax on groceries, it raised the tax on nearly every other good and service. It attempted to calculate this rate increase to exactly offset the revenue loss from grocery tax relief.
However, the state’s “economists” failed to allow for consumers’ negative responses to higher taxes. Supply side economics in reverse, as it were. With a nearly one percent increase in the cost of most goods, people bought less, or increasingly shopped out of state. The result was that net revenue losses were ten pecent more than expected.
Of course, any tax cut—even if by accident—is a good idea. Sadly, this was merely a reduction in a tax hike, but it was better than nothing. Truly, an “error of enchantment.”

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