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4. The Three Classes of Tax Interventionism
The various methods of taxation which can be used for the regulation of the economy--i.e., as instruments of an interventionist policy--can be classified in three groups:
1. The tax aims at totally suppressing or at restricting the production of definite commodities. It thus indirectly interferes with consumption too. It does not matter whether this end is aimed at by the imposition of special taxes or by exempting certain products from a general tax imposed upon all other products or upon those products which the consumers would have preferred in the absence of fiscal discrimination. Tax exemption is employed as an instrument of interventionism in the case of customs duties. The domestic product is not burdened by the tariff which affects only the merchandise imported from abroad. Many countries resort to tax discrimination in regulating [p. 742] domestic production. They try, for instance, to encourage the production of wine, a product of small or medium-size grape growers, as against the production of beer, a product of big-size breweries, by submitting beer to a more burdensome excise tax than wine.
2. The tax expropriates a part of income or wealth.
3. The tax expropriates income and wealth entirely.
We do not have to deal with the third class, as it is merely a means for the realization of socialism and as such is outside the scope of interventionism. The first class is in its effects not different from the restrictive measures dealt with in the following chapter.The second class encompasses confiscatory measures dealt with in Chapter XXXII [p. 743]