Deadweight Loss

Economic value destroyed when a tax or price control prevents trades both sides wanted.

Deadweight loss is the value that simply vanishes when something distorts a market away from its efficient level: trades that would have benefited both buyer and seller never happen. A tax raises the price buyers pay and lowers what sellers keep, so some mutually beneficial exchanges stop occurring — the government collects revenue on the trades that remain, but nobody collects the surplus from the trades that disappeared. Economists judge policies partly by how much deadweight loss they create per dollar raised.

The steep luxury tax raised little revenue but created real deadweight loss as buyers simply stopped purchasing yachts.