1) A tax imposes a burden.
2) If a tax has no effect on a man’s lifestyle, then it imposes no burden on him.
3) Therefore, if a tax has no effect on a man’s lifestyle, then it must impose a burden on someone else.
That is the argument that Krugman things betrays “no coherent picture of how the pieces fit together”. I would like to know more specifically whether he disagrees with 1), disagrees with 2), or disagrees with the logic that leads from 1) and 2) to 3).
In more detail:
1) A tax allows the government either to spend more or to reduce someone else’s taxes. Therefore either the government or that someone else consumes more resources. Those resources have to come from somewhere. Moreover — and this is the key fallacy this post was intended to combat — green pieces of paper are not resources. If the government consumes more actual goods and services, then someone else must consume fewer goods and services. It is certainly true that the number of total of all goods and services is not fixed, but the act of transferring money from one account to another does not, by itself, change that total. Therefore, for the purposes of this exercise, the total is fixed.
2) If a man does nothing but park cars all day both before and after you’ve taxed him, and never planned to do anything but park cars all day whether you’ve taxed him or not, then a tax can’t alter his consumption of goods or services.
3) Surely I don’t have to explain how this follows?
Edited to add: Many are arguing in comments that increased government spending can lead to increased output. And so it can in many circumstances. But the increased spending yields the increased output whether or not Mr Kendrick gets taxed. The question here is: “What are the effects of trying to tax Mr Kendrick?” “What are the effects of government spending?” is a different question, no less interesting, but not the topic of this series of posts.