What is "flypaper theory"

n. 1 (context economics English) The idea that the burdens of taxation "stick" to those taxed directly instead of spreading through the economy. 2 (context military English) The idea that it is desirable to lure one's enemy into a single country or area where they can be more effectively dealt with.

The flypaper theory of tax incidence is a pejorative term used by economists to describe the assumption that the burden of a tax, like a fly with flypaper, sticks wherever it first lands. Economists point out several flaws with the assumption:

• it ignores the elasticity of goods; and
• it ignores the ability of producers to shift the cost of the tax onto consumers.

For example, consider a tax levied on a luxury item such as jewelry. Such a tax, while intended to target the wealthy, may not actually accomplish this objective, as the wealthy can simply choose to buy less jewelry. Instead of collecting more money from the wealthy, the tax has the effect of hurting jewelry merchants, who are not the intended targets of the tax.

As another example, suppose a tax is levied on the sellers of a product. The sellers may simply raise the price of the product, thus shifting the burden of the tax onto the buyers of the product.

This should not be confused with the flypaper effect, which holds that money from a federal authority to a state authority tends to increase overall expenditure rather than merely substitute for locally-raised revenue.

Flypaper theory may refer to:

• Flypaper theory (economics), a theory regarding tax burdens
• Flypaper theory (strategy), a military theory regarding drawing enemies to a single area

In military strategy, the flypaper theory is the idea that it is desirable to draw enemies to a single area, where it is easier to kill them and they are far from one's own vulnerabilities. Perhaps the best description of the benefits of the strategy was given by U.S. Army General Ricardo Sanchez, who was commander of US ground forces in Iraq:

This is what I would call a terrorist magnet, where America, being present here in Iraq, creates a target of opportunity.... But this is exactly where we want to fight them.... This will prevent the American people from having to go through their attacks back in the United States.

The desirability of the strategy depends upon how many new enemies are created by using it, how many of them are drawn to the "flytrap," and how easily they are dispatched.