Tautology Form

Tautology Form

Tautology, a form of pseudo-reasoning in which the 'conclusions merely restate the original assumptions, although sometimes they create an impression of having achieved fuller understanding. By their nature tautologies are irrefutable. An example is: 'Commodities which have many effective substitutes have elastic demands.' If substitutability is defined in terms of the ease with which purchasers shift between commodities when their relative prices change, the existence of good substitutes necessarily implies a high elasticity of demand: both are thus defined in similar terms.

Tax, Direct and Indirect, a direct tax is levied directly on the tax-payer, e.g. income tax, surtax, estate duty, private car licence, local rates; an indirect tax is levied indirectly, e.g. the excise duty on beer and spirits, the purchase tax, the Customs duty on imported textiles, cameras, clocks, cars. This distinction is administrative rather than economic; thus the motor tax is administratively direct but economically indirect since it must be paid if the consumer is to use the motor-car.

The important economic distinction is between taxes that directly affect the demand for and the supply of goods and services and therefore their prices, and taxes that do not. This turns on the distinction between their immediate impact and their final incidence. Income and capital taxes cannot be avoided, so that the ultimate incidence is the same as the initial impact. Indirect consumers' expenditure (or outlay) taxes can be avoided to an extent depending on the elasticity of the demand for and of the supply of the product, that is, the degree of competition in its markets. If the demand is relatively elastic the price cannot be raised to pay the duty because consumers will buy the nearest substitutes which are not taxed; if demand is relatively inelastic buyers will not easily go elsewhere if the price is raised and the producer can pass at least part of the tax to the consumer. If the supply of the factors used for the product is relatively inelastic and they cannot readily find other employment, the producer may be able to shift the tax back in lower wages , salaries, interest, rent, etc.; if it is elastic it will be less easy to reduce these factor prices. Broadly, direct taxes tend to be progressive (by intention) indirect taxes to be regressive (in effect rather than by intention).

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