Discouraging Supply

Harris’ inclination towards higher taxes and price controls on groceries is likely to discourage the supply of goods and services.

Raising taxes on high income earners and corporations has been a long standing platform of Harris ever since she was Senator of California. In addition, she also appears to support significantly raising the capital gains tax rate to the ordinary income tax rate for at least a subset taxpayers. Higher taxes in effect reduce the income of companies and the most productive workers, which would have some negative impact on their incentive to produce. A range of studies support the common sense notion that there is a negative relationship between taxes and economic growth.

Price controls have been employed across the world and for thousands of years and almost always have poor results.

As early as 300 AD, the Roman Emperor Diocletian blamed higher inflation on profiteers and unveiled an edict that set maximum prices for a range of goods. More recently, President Nixon experimented with price controls for a few years the 1970s. The common result of price controls are shortages and ultimately much higher prices.

Some businesses respond to the controls by shutting down rather than selling at a loss, some hoard products, and some lower the quality of their products to reduce costs. When the price controls are eventually lifted, a combination of pent-up demand and shortages commonly lead to a surge in prices. The double digit inflation in the 1970s was in part attributed to the expiration of Nixon’s price controls.

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