Chris Dillow:
The paradox is this. When it comes to tax, the right are keen to stress that people respond to incentives. And yet when it comes to crime they seem coy about incentives, and prefer to talk about “multiculturalism“ or genes.
The paradox is especially strong because economic theory is much clearer on the link between poverty and crime than between tax rates and tax revenue.
This is because in the case of taxes, the income and substitution effects work in opposite ways. The substitution effect causes people to prefer leisure over work when taxes rise, whilst the income effect causes them to want to work more to recoup lost income. However, with crime the two work in the same direction. The income effect causes a poor person to turn to crime to raise money, whilst the substitution effect means the unemployed have more time with which to commit crime, and lower penalties - no danger of losing one‘s job - for doing so.
Unsurprisingly, therefore, the empirical evidence is much stronger for a link between relative poverty or inequality (pdf) and crime than it is for a link between tax rates and revenues.
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