To the extent that purchases stay the same and we pay the cost domestically, that is indeed a tax paid by producers or consumers. Yes, it lowers their remaining capital, but is probably one of the least distortionary available taxes. In the terms described above, if you used the money to cut income tax rates, you’d probably be ahead.
Taxing something where the supply or demand is fixed is extremely efficient, and the extent to which purchases stay the same is exactly the extent to which supply or demand is inflexible. The economic inefficiency of a tax comes from the changes in behavior induced by the tax. The difference between a tariff and a sales tax, is that it induces you to buy native products.
Taxing something where the supply or demand is fixed is extremely efficient, and the extent to which purchases stay the same is exactly the extent to which supply or demand is inflexible. The economic inefficiency of a tax comes from the changes in behavior induced by the tax. The difference between a tariff and a sales tax, is that it induces you to buy native products.