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Growth Grade: The Stache Act and the Economics of Grooming

March 1, 2012 3 minute Read by Brian Wesbury

In what appears to be a well-organized April Fool’s Joke, a group called the American Mustache Institute wants a $250 annual tax refund for Mustached Americans. You can find its pitch here. “The Stache Act” has supposedly been forwarded to the Ways and Means Committee for study. I give the tax rebate idea a Growth Grade of F, but, let’s have some fun discussing it. When I look back at pictures from the Wild West, I am always amazed that facial hair was so prevalent. Much of it was unkempt, but some of those mustaches were works of art. The Handlebar, the Dali, the Pencil, or the English…all took time and care to grow and groom. Most of these glorious moustaches were grown before there was an income tax in the United States, the first of which was put in place in 1861. In 1913, with the passage of the 16th Amendment to the U.S. Constitution, the income tax became a permanent fixture of the landscape. At the same time, mustaches became less prevalent. Is there a connection? Who knows? What we do know is that, at the margin, The Stache Act would increase the number of mustaches in the United States. Mustache grooming equipment – razors, trimmers, wax, and mirrors – would see a bounce in sales. However, this increase in mustache-related growth would not lift overall economic growth. A dollar spent purchasing mustache grooming supplies would be a dollar not spent doing something else, like buying chew toys for the family pet. As long as the government is running a deficit, a tax refund just shifts the cost to someone else. The loss of revenue would be made up by either higher taxes on non-mustached Americans or by more government debt. Moreover, by distorting the normal supply and demand of the free market, a tax rebate causes an inefficient allocation of resources, which would reduce overall growth. In other words, there is no such thing as a free mustache. Growth Grade for The Stache Act = F


Author

Brian Wesbury
Brian Wesbury

2012 Economic Growth Fellow

Brian Wesbury is chief economist at First Trust Advisors L.P. in Wheaton, Illinois. He is a member of the Academic Advisory Council of the Federal Reserve Bank of Chicago. Formerly he was vice president and economist for the Chicago Corporation and senior vice president and chief economist for Griffin, Kubik, Stephens, & Thompson. From 1995-96 he served as chief economist to the Joint Economic Committee of Congress. His most recent book, “It’s Not As Bad As You Think,” was published in 2009 by John Wiley & Sons. He received an M.B.A. from Northwestern University’s Kellogg Graduate School of Management and a B.A. in Economics from the University of Montana.

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