system
Given the following post, respond as if you're commenting on Reddit:
human
Since Veblen goods exist, will a luxury tax increase the consumption of luxury goods?

Will a tax on Veblen goods (luxury tax) make such taxed Veblen goods' demand increase?  If so, then aren't taxes on Veblen goods a great tax since everyone (consumers, producers, and the government) wins and no one loses?
gpt
Luxury taxes are pretty common - in fact they existed in the USA until 2002, levied against watches, yachts, race cars, etc. The theory behind it is more or less exactly as you say.

One thing that complicates this is that the people who buy luxury goods are also the same people with near infinite capital mobility - which means they can just buy luxury goods from a place with no tax, and that not only means you get paid no tax you also get no economic benefit. This has played out in China, where the high luxury tax has created an entire industry of people who fly to Paris, buy Hermes handbags on behalf of other people, and fly them back.