Is income tax necessary?

[Brian-M]

Governments of first-world nations spend huge amounts of money on public infrastructure and services. These same nations also tend to impose income tax.

Assuming we want to retain these services, that we want to continue developing and maintaining the infrastructure, and assuming that we also want a healthy economy...

Is imposing an income tax really necessary to achieve this?

Couldn't we instead achieve the same result through other means?

For example, we could impose an additional property tax to make up the difference. People who live in the most expensive properties and larger houses, or live in the most prosperous regions would pay the most tax. (Property tax would be passed on through increased rent, lease and hotel bills for non-homeowners.)

Maybe supplement this with higher sales tax on luxury goods, or government ownership of public utilities, higher annual registration fees for cars that increase in a nonlinear rate with the value of the vehicle, ect.

(I'm just suggesting this as a hypothetical situation, I'm not arguing that we would necessarily be better off getting rid of income tax.)

Thoughts?

 

[marplots]

I think there have been other means that have worked historically. Conquest and rape of other nations for their wealth, slavery, alien technology.

 

[Tippit]

Governments of first-world nations spend huge amounts of money on public infrastructure and services. These same nations also tend to impose income tax.

Assuming we want to retain these services, that we want to continue developing and maintaining the infrastructure, and assuming that we also want a healthy economy...

Is imposing an income tax really necessary to achieve this?

Couldn't we instead achieve the same result through other means?

For example, we could impose an additional property tax to make up the difference. People who live in the most expensive properties and larger houses, or live in the most prosperous regions would pay the most tax. (Property tax would be passed on through increased rent, lease and hotel bills for non-homeowners.)

Maybe supplement this with higher sales tax on luxury goods, or government ownership of public utilities, higher annual registration fees for cars that increase in a nonlinear rate with the value of the vehicle, ect.

(I'm just suggesting this as a hypothetical situation, I'm not arguing that we would necessarily be better off getting rid of income tax.)

Thoughts?

Do you typically ask hypothetical questions in the guise of sincere questions? Obviously there are other types of taxes besides income taxes, and that these could ostensibly used in place of the income tax. The government could also operate with absolutely no conventional taxation at all, and simply monetize its expenses directly, which would put all of the burden of government on the price system, instead. Of course, this is really just another tax.

So the question about what methods of taxation should be used really boils down to questions about costs of administration, accountability, transparency, whether the methods are progressive or regressive, and perhaps most importantly, whether it is appropriate for the role of a constitutional government, or does it enable arbitrarily unlimited spending.

 

[Brian-M]

Do you typically ask hypothetical questions in the guise of sincere questions?

There's no reason why a question can't be both hypothetical and sincere at the same time. I'm sincerely interested in the answer to this hypothetical question.

I made a point of stating that it was a hypothetical question to avoid responses based on the incorrect assumption that I'm asking this question for the sake of advocating some form of radical tax reform.

Obviously there are other types of taxes besides income taxes, and that these could ostensibly used in place of the income tax. The government could also operate with absolutely no conventional taxation at all, and simply monetize its expenses directly, which would put all of the burden of government on the price system, instead. Of course, this is really just another tax.

So the question about what methods of taxation should be used really boils down to questions about costs of administration, accountability, transparency, whether the methods are progressive or regressive, and perhaps most importantly, whether it is appropriate for the role of a constitutional government, or does it enable arbitrarily unlimited spending.

Actually, I'm mostly wondering if it could result in a stable system equivalent to the current systems, what kind of differences switching to an alternate system would have on most people, and why we don't see some first-world countries taking approaches that don't heavily depend on income tax.

 

[The Don]

Governments of first-world nations spend huge amounts of money on public infrastructure and services. These same nations also tend to impose income tax.

Assuming we want to retain these services, that we want to continue developing and maintaining the infrastructure, and assuming that we also want a healthy economy...

Is imposing an income tax really necessary to achieve this?

Couldn't we instead achieve the same result through other means?

For example, we could impose an additional property tax to make up the difference. People who live in the most expensive properties and larger houses, or live in the most prosperous regions would pay the most tax. (Property tax would be passed on through increased rent, lease and hotel bills for non-homeowners.)

Maybe supplement this with higher sales tax on luxury goods, or government ownership of public utilities, higher annual registration fees for cars that increase in a nonlinear rate with the value of the vehicle, ect.

(I'm just suggesting this as a hypothetical situation, I'm not arguing that we would necessarily be better off getting rid of income tax.)

Thoughts?

Tax income in most developed countries is derived from a variety of sources typically income, consumption (or sin) and assets (or inheritance). Typically tax revenue is derived from a variety of sources so that the amount derived from any one source is not so high and so ordinary folk find it difficult to avoid these taxes.

Eliminating income taxes and replacing them with a combination of asset and/or consumption taxes would have a significant impact on the economy. Firstly, for most people income is comparatively easy to determine at (least to a first order) because most people have one or two major sources of employment income and a limited set of other incomes. If there is a major shift towards property taxes, this will have a major impact on the economy, landlords will suddenly find their costs soaring which will inevitably will end up with the costs being passed onto the tenants, not the desired effect at all and at least in the U.K the construction industry is a major driver to the economy and we have a chronic shortage of housing so external constraints on the construction industry are undesirable. A major shift to consumption and sin taxes is unlikely to work because they are too easy to avoid and evade either by simply not consuming (so not buying that expensive car, or buying it in a tax effective way ) or by avoiding or evading the taxes by buying in more tax-friendly jurisdictions.

It's not to say that this can not work but the balance of taxes from different sources and a focus in income tax has the desired results of raising tax revenue, the rich and the high earning paying the vast majority of taxes and avoidance and evasion being kept within acceptable limits.

Also, I pay around £30,000 in income taxes, the property and consumption taxes to recover these would have to be extraordinarily high (given that I don't buy what most people consider luxury goods - unless a £5 bottle of wine or a £20 Indian meal is considered a luxury).

 

[Sceptic-PK]

Governments of first-world nations spend huge amounts of money on public infrastructure and services. These same nations also tend to impose income tax.

Assuming we want to retain these services, that we want to continue developing and maintaining the infrastructure, and assuming that we also want a healthy economy...

Is imposing an income tax really necessary to achieve this?

Couldn't we instead achieve the same result through other means?

For example, we could impose an additional property tax to make up the difference. People who live in the most expensive properties and larger houses, or live in the most prosperous regions would pay the most tax. (Property tax would be passed on through increased rent, lease and hotel bills for non-homeowners.)

Maybe supplement this with higher sales tax on luxury goods, or government ownership of public utilities, higher annual registration fees for cars that increase in a nonlinear rate with the value of the vehicle, ect.

(I'm just suggesting this as a hypothetical situation, I'm not arguing that we would necessarily be better off getting rid of income tax.)

Thoughts?

It all comes down to the math, really. % of government revenue that comes from income tax versus the revenue it gets from raising taxation rates elsewhere. Different regions have a different balance between the taxes, so I think it would be difficult to reach definitive conclusions.

I do consider income tax far more efficient and fair than something like property tax though, yuk.

The OECD bean counters recently released a report that said

TAX revenue has fallen further since the financial crisis in Australia than in almost any other advanced nation as a result of its excessive dependence on company taxes.

An OECD study reveals other countries that suffered much more than Australia from the economic downturn have enjoyed much more stable revenue because of their greater use of consumption taxes, such as the GST.

http://www.theaustralian.com.au/nat...-tax-system-oecd/story-fn59nsif-1226725606335

 

[wrs]

It depends on how much income a person makes as to how they feel about the income tax. I always feel penalized by the tax because there is always something that I could better use the income on. I see the money that I pay the fed govt being wasted on things that don't serve the public at large and wonder how the fed govt is able to maintain such an imbalance of power in society given what it has returned to society and the damage it's ever increasing pile of laws is doing to society. The fed govt needs to be cut down to size and that alone would reduce the tax burden.

 

[The Don]

It depends on how much income a person makes as to how they feel about the income tax. I always feel penalized by the tax because there is always something that I could better use the income on. I see the money that I pay the fed govt being wasted on things that don't serve the public at large and wonder how the fed govt is able to maintain such an imbalance of power in society given what it has returned to society and the damage it's ever increasing pile of laws is doing to society. The fed govt needs to be cut down to size and that alone would reduce the tax burden.

(my highlighting)

Presumably by cutting down on those elements of government expenditure that you personally don't consider important. For my part the U.K. government could significantly reduce expenditure on useless defence boondoggles like the new carriers and home grown air superiority fighters (I'd fancy SAAB Gripfens instead) and on the stupid PFI contracts. Trouble is that I'm in a minority and any significant current expenditure is likely to have significant support and/or be underappreciated.

 

[wrs]

(my highlighting)

Presumably by cutting down on those elements of government expenditure that you personally don't consider important. For my part the U.K. government could significantly reduce expenditure on useless defence boondoggles like the new carriers and home grown air superiority fighters (I'd fancy SAAB Gripfens instead) and on the stupid PFI contracts. Trouble is that I'm in a minority and any significant current expenditure is likely to have significant support and/or be underappreciated.

I am sure that it doesn't matter what it is that I feel is important or not. The federal govt has no oversight and thus is free to waste what it takes and then come back and ask for more, no actually, demand more. This is how it operates and on that basis alone, I know it could be cut down a lot, irrespective of what anyone likes or dislikes. The fed govt is the equivalent of one of these 400lb people that get on these weight reduction reality shows. You see their diet and you wonder how they even have time to eat that much and then the time spent in the bathroom must be substantial. These people are so busy feeding themselves they have little time for anything else. This is what the fed govt has become.

 

[Mojo]

...unless a £5 bottle of wine or a £20 Indian meal is considered a luxury.

Luxury! We 'ad to mek do wi' watter and a bag of cold chips.

 

[Mojo]

Is imposing an income tax really necessary to achieve this?

Couldn't we instead achieve the same result through other means?

Not without increasing inequality. If you shift taxation away from income tax to purchase tax, it impacts the poor because they spend a higher proportion of their income. If you shift it to property tax it impacts the poor because they spend a higher proportion of their income on housing; even if they don't own property they'll be saddled with the property tax on wherever they live (it isn't going to come out of the landlord's pocket, is it?).

 

[The Don]

I am sure that it doesn't matter what it is that I feel is important or not. The federal govt has no oversight and thus is free to waste what it takes and then come back and ask for more, no actually, demand more. This is how it operates and on that basis alone, I know it could be cut down a lot, irrespective of what anyone likes or dislikes. The fed govt is the equivalent of one of these 400lb people that get on these weight reduction reality shows. You see their diet and you wonder how they even have time to eat that much and then the time spent in the bathroom must be substantial. These people are so busy feeding themselves they have little time for anything else. This is what the fed govt has become.

Says you. The deficit hawks have failed time and again to propose a significant reduction in expenditure. That's not to say that it is impossible but the vast majority of money is either well spent and/or is specifically targeted to support some aspect of life that other people think vital.

Do you have any specific examples from the U.S. budget where hundreds of billions of dollars could be saved ?

 

[Loss Leader]

Is there any evidence that a different tax system would be easier to administer? Once you're collecting 200 million of anything, it seems like some degree of bureaucracy is inevitable.

 

[balrog666]

Says you. The deficit hawks have failed time and again to propose a significant reduction in expenditure. That's not to say that it is impossible but the vast majority of money is either well spent and/or is specifically targeted to support some aspect of life that other people think vital.

Do you have any specific examples from the U.S. budget where hundreds of billions of dollars could be saved ?

Eliminating the Department of (mis)Education.
Eliminating HUD.
Eliminating agricultural subsidies.
Eliminating subsidies for solar energy, wind energy, coal production, etc (90% of the Department of Energy).
Eliminating federal subsidies for "high-speed train" boondoggles (see California) and mass transport that doesn't.
Returning the EPA to science-based regulations.
...
How many more do you need?

 

[wrs]

Says you. The deficit hawks have failed time and again to propose a significant reduction in expenditure. That's not to say that it is impossible but the vast majority of money is either well spent

prove it

and/or is specifically targeted to support some aspect of life that other people think vital.

Please provide support.

Do you have any specific examples from the U.S. budget where hundreds of billions of dollars could be saved ?

Specific examples of $100 billion savings? What kind of question is this? Does anyone? A specific example would be to shut down the Air Force if you want one but hundred billion dollar savings are made by either across the board cuts or a multitude of individual cuts. There are no single $100 billion savings unless you are talking about multiple years. Maybe you need to be more specific or reasonable in your request.

However, the govt shut down for about two weeks in October and nothing bad happened as a result. Just a one month unpaid shutdown each year could probably save a hundred billion or so. I see no problem with that since it's what manufacturing companies have done regularly in bad economic times and they managed to stay in business as a result.

 

[theprestige]

How about a fee system?

Every year, quarter, whatever, the government sends out an itemized bill for services rendered, to every citizen. Each citizen pays their bill. The amount billed is pro-rated based on formulas that estimate how much of each service you actually used.

Base prices are set higher than raw cost, to account for the fact that some people can't afford to pay their bill, and so others will have to pay more to cover the shortfall. Every year, each citizen files documentation about their income and other financial situation details, so the government can determine whether they should be billed for their full amount that year.

The big advantage is that every citizen could see the actual list of services they're supposedly getting from the government, and can make an informed decision about whether they're getting their money's worth.

 

[wrs]

How about a fee system?

Every year, quarter, whatever, the government sends out an itemized bill for services rendered, to every citizen. Each citizen pays their bill. The amount billed is pro-rated based on formulas that estimate how much of each service you actually used.

Base prices are set higher than raw cost, to account for the fact that some people can't afford to pay their bill, and so others will have to pay more to cover the shortfall. Every year, each citizen files documentation about their income and other financial situation details, so the government can determine whether they should be billed for their full amount that year.

The big advantage is that every citizen could see the actual list of services they're supposedly getting from the government, and can make an informed decision about whether they're getting their money's worth.

Well I can see a flaw right away. Military for instance would be billed automatically as you are assumed to be "protected" by it. So would almost any of these "services" the govt provides. Now as regards SSI, how would that work since it's the people using it that don't currently pay for it? Same for Medicaid and Medicare.

 

[Joecool]

Well I can see a flaw right away. Military for instance would be billed automatically as you are assumed to be "protected" by it. So would almost any of these "services" the govt provides. Now as regards SSI, how would that work since it's the people using it that don't currently pay for it? Same for Medicaid and Medicare.

That's the country's current problem. Too many people using/receiving money from the government who aren't contributing. How many services would the government actually provide?

 

[Vilhelmo]

Income taxes are unneccessary & inefficient.

The most efficient tax is an Economic Rent Tax that, unlike all others, does NOT add to prices, does not deter production, distort market mechanisms or otherwise create deadweight losses.

 

[shuttlt]

That's the country's current problem. Too many people using/receiving money from the government who aren't contributing. How many services would the government actually provide?

Surely the problem is that people lack the courage of their convictions and aren't actually prepared to deal with the consequences of cutting social security to the extent they often claim?