Shopping Taxes and Covid

Abstract

To contain Covid, a large reduction in contact was necessary. The lockdowns in the US were insufficient. In addition, lockdowns misallocate resources across sectors. Instead, I propose a tax on in-person shopping. Each customer would pay $X per shopping trip. The optimal shopping tax is higher in urban counties than in rural ones. This is because there is more social contact in cities. The tax is highest at the start, and it begins to fall once the virus is under control. In the urban county, the tax starts at about $140 and eventually drops to $90. In the rural county, the tax is $62 in the beginning and is no longer necessary after about 380 days. The shopping tax can be reduced if there is a mask mandate or an economic stimulus program.