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Income tax

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An income tax is a requirement that people pay a percentage of their income (usually on an annual basis) into the coffers of the state in whose territory they are resident.

As such, it is deemed by many to be the fairest tax of all, since if a person earned a certain amount of money, they can surely pay a part of it in taxes, especially if they knew in advance that some percentage of their earnings would be cropped. However, there is strong debate among economists as to the distortionary effect of income taxes on the economy, with some (mostly liberal) economists saying that, due to the need to have income, it creates very little distortion, and others (mostly conservative) saying that it does still reduce the incentive to work more or invest more, causing people to then buy more consumptive goods rather than putting the money back into the economy.

Presently, many countries have "progressive taxation" on incomes, meaning that people with larger incomes are taxed in higher proportions. This still leaves the richest people the most money.

Criticism of income taxes[edit]

Conservatives and libertarians hate them for various reasons:

  • Fundamentalists hate them because they cannot turn up any sanction for income taxes in the Bible, not to mention that they do not want anyone to know that their church is actually a cover for a lucrative law firm.
  • Paleo-libertarians hate them because they cannot turn up any sanction for income taxes in the U.S. Constitution (except for that pesky Sixteenth Amendment, but everybody knows that the Sixteenth Amendment was never legally passed).
  • Pro-business and small-government conservatives/libertarians hate them because they consider keeping track of income and filling out tax forms an expensive waste of time, and also because the red tape needed to keep track of all the incomes makes the government bloated.
  • Supply side economics fans offer the following "argument" against income taxes, especially progressive ones: If you take $1,000,000 from a rich person via income tax and distribute it evenly among one million people, most of those people would just use it to buy a Coke and burp the money away. By contrast, with no income tax the rich person could invest it in research that eventually yielded cheaper soft drinks, so the one million people could get the extra Coke anyway. Uh, yeah. A lot of people don't see the problem in that being the sale price does not have to decrease given lower cost (they'll say they need the money to cover the R&D).

Certainty[edit]

Nothing is certain except death and taxes (unless you believe in cryonics and have a creative accountant).

US income tax[edit]

Conservatives in the US love to point out (over and over again) that the richest people end up paying the vast majority of the income tax in the US. However, this is because they leave out "payroll" taxes, which everyone (up to a certain dollar amount of income) pays at a flat rate. Due to the cap on taxable income for payroll taxes, they end up making the poor pay far more into the government than regular "income taxes," and in the end the American system ends up looking rather close to a flat tax after all. (Just far, far more complicated.)

See also[edit]