The Penny Drops

In today’s Best of the Web newsletter, WSJ editorialist James Taranto pokes some fun at the New York Times:

The editorial board of the New York Times has stumbled onto a possibly revolutionary economic idea. The paper is sounding a note of caution about Gov. David Paterson’s proposal to impose a tax on theater tickets:

The proposal could increase ticket prices by about 8 percent, which could dim Broadway’s lights as tourists start thinking twice about that vacation in Manhattan. If tourism slumps in the city, the state’s budget problems would surely worsen along with it. Rocco Landesman, the president of Jujamcyn Theaters, summarizes his latest pleas to lawmakers this way: “Please, don’t kill your golden goose.”

Normally, a tax hike is a classic win-win: The government raises taxes, people pay the higher taxes, and the government gets more revenue, which it uses to stimulate the economy, promote social justice, educate our children, free us from dependence on foreign oil, and provide health care for all.

So how come the theater ticket tax doesn’t work the same way? Is Broadway some kind of Bizarro World where the normal rules of economics are stood on their heads?

Or could it be that this maddeningly counterintuitive phenomenon the Times has identified, in which taxing economic activity actually discourages it, can be found in other areas as well?

We await further enlightenment from future editorials.

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