Luxury goods often have much higher elasticities of demand than do goods purchased by a broad base of people. Why, then, are governments more likely to tax luxuries than these staple goods?

Everyone uses staple goods; therefore, the government taxes luxury goods because more people use them. If the government would have followed the Ramsey model, then it would be imposing more highly on staple goods than luxury goods. It implies that putting high income on goods consumed by people with huge salaries will automatically earn lower as compared to imposing a tax on staple goods that are used by everyone. This will produce an efficient result, but on the other hand, it will be violating the governmental fairness rule of vertical equity of ability rule. Basing on the Haig Simon model implies that the definition of the comprehensive income usually works in identifying the resources that are taxed as the relative transition in someone's ability to pay tax. It is observed that the Haig Simons rule agrees with the government's idea of taxing more on luxuries than staple food since the goods that everyone rarely purchases, people with resources purchase. The inefficiency cost, which will arise, will affect the taxing of staple goods more as compared to taxing luxury goods.