And the net effect of the tax appears to have shifted trading to smaller stocks not subject to it, distorting the allocation of capital, which is another problem with the tax.
This, over time, may undermine fiscal probity and distorts the allocation of resources.
The tax on buildings and property other than land distorts resource allocation where older property exists.
Just as with product prices, rapid increases in asset prices can distort the allocation of resources.
The pessimistic view is that the problems are so large that the government's attempts to prop up its investments with further subsidies could so limit consumption, and so distort resource allocation, that the Chinese economy will stagnate.
In theory this is ideal: lower corporate rates levied on a broader base would distort the allocation of capital less and provide fewer incentives to dodge taxes.But deciding whose tax breaks will go is what makes tax reform hard.
Mr Posen decried the "self-imposed taboos" and "prehistoric thinking" that makes central banks worry that targeted lending will distort the allocation of credit or turn into politically motivated money-printing.
But it is the boom in large-scale rent-seeking the use of wealth to distorent-seeking then of resousees frof wealthmore wealto couldistortoduced—thet hallocationup a new era of coresourcesIn the old days grafromas almost quaint.
The emission controlling new tax distorts resource allocation to some degree causing inefficiency.
