The Deadweight Loss of a Tax A tax leads to a deadweight loss because it creates inefficiency: some mutually beneficial transactions never take place because of the tax-namely, the transactions PE – QT. The yellow area here represents the value of the deadweight loss: it is the total surplus that would have been gained from the PE – PT transactions. If the tax had not discouraged transactions—had the number of transactions remained at PE because of either perfectly inelastic supply or perfectly inelastic demand—no deadweight loss would have been incurred.