Welfare Loss Of Taxation

If you hate taxes and want to sound like you aren’t just moaning and groaning, you’re experiencing “welfare loss of taxation.” In economics, welfare loss happens when things aren’t efficient. See: Deadweight Loss.

Oftentimes, the government tries to use taxes to correct market inefficiencies and make them efficient. But other times, they’re just collecting taxes, since that’s what governments do.

Welfare loss of taxation happens specifically when there’s that market inefficiency, resulting in a deadweight loss from a change in the tax rules. Thus, it’s also called deadweight loss of taxation (look at a graph of deadweight loss and you’ll see a little triangle that shows how much loss there really is, which depends on how far away from equilibrium the current outcome is).