Source: David Friedman’s Substack
by David Friedman
“The mistake of assuming that the burden of a tax is born by whomever hands over the money is not limited to the case of tariffs. Consider the taxes that fund Social Security, half on the employer, half on the employee. Of each dollar the employer pays ten cents goes to the government, ninety to the employee, who pays ten cents to the government (rate invented to simplify the argument). It follows that of each dollar the employer pays the employee gets eighty cents, the government twenty. … Whether the government takes the money before or after the transfer from employer to employee or, as in the present system, half before and half after, does not matter, is a purely cosmetic difference.” (08/19/25)