"If you tax labor, people will work less"
The title of this post is technically true in many circumstances, but it's more complicated than some think. Let me explain why.
It is true that if you impose a tax on a good like coffee, then people will demand less coffee, since the price of coffee increased relative to other goods, like tea. This is called the substitution effect. But there's also the income effect! When consumer incomes rise, then they will demand more so-called normal goods.
The classic economic model states that people will work more when the opportunity cost of leisure becomes higher (see this Khan Academy video for an explanation). This simple model predicts that when incomes go up, people will work more. But this simple model doesn't tell the full story.
The reason is that leisure is also a normal good, meaning that when people's income go up, they will consume more of it. When this happens in the labor market, economists call this a "backwards bending labor supply curve." The intuition is simple: if you could work for ten times your current wage, you'd probably retire earlier, or try to work fewer hours.
There's also a wealth of empirical evidence that people work fewer hours as they get richer. Over the last two hundred years, median and average real incomes have gotten much higher, and yet we've observed declining working hours in the majority of nations in the world.
Cross-nationally, the workers in the poorest nations also work the longest hours.
Since taxing people causes them to lose income, doesn't that imply that people will work more if you tax them? This contradicts the conventional wisdom (and some empirical evidence) that income taxes cause people to work less. So, if the conventional wisdom is correct, then we have a paradox. What's going on?
The answer is that aggregate income is more-or-less preserved through taxation. If you tax A and give to B, then A will work more, but B will work less. These charts from The Tax Foundation help explain.
But now we've shown that the original maxim that taxing labor gets us less of it, is slightly inaccurate. Under some assumptions, people will generally only work less under income taxes because of how that money is redistributed!