Measured in terms of the reduction in private sector output, what is the cost of taxing a dollar away from the private sector and transferring it to the government?
1. One dollar
2. Less than one dollar, because the administration of and compliance with the tax laws creates jobs for people
3. Less than a dollar, because of the excess burden resulting from the elimination of productive exchanges by the taxes
4. More than a dollar, because collection of the taxes requires resources that would otherwise be available for private sector production