There are a lot of hard-liners who object to taxation and government, period, and while I sympathize to a degree, I think this also blurs important distinctions.
Not all taxes are created equal; not all taxes are equally bad - but the income tax is one of the worst.
A useful way to think of taxes is as a disincentive. A road tax is a disincentive for driving on the road; a meal tax is a disincentive for eating at a restaurant, etc.
When you think of a tax as a disincentive to a behavior, it becomes clear that not all taxes are created equal, because not all behavior is created equal.
So what does the income tax disincentivize? It disincentivizes labor. Labor, of course, is the source of all value in the economy. The income tax disincentivizes adding value to the economy.
Even if taxes were to stay at exactly the same rate, the income tax would be among the worst ways to apportion the tax burden.
The income tax has some support because it’s viewed by some on the left as a “soak the rich” tax. The thing is, it’s really not, because the truly wealthy are wealthy because of assets as opposed to income. As Warren Buffet has pointed out, he pays a tax rate of 17.7% for making $46 million, while his secretary gets taxed at 30% for making $60,000. What kind of ‘soak the rich’ tax is that?
So for the sake of argument, if taxes were to stay the same in amount raised, what would be a better way to apportion them?
The ideal maxim is; “tax what the individual takes away from society, reward what the individual contributes to society.”
The income tax taxes what individuals contribute to society; their labor, their ingenuity, their passion and their skills. This is why it’s among the worst possible taxes. The assemblyline worker and the CEO alike have their labor taxed in this way. When there is a high tax on labor, it shouldn’t be surprising when there are high unemployment rates; it should be surprising when there aren’t.
Using land, natural resources and extracting rent from others take away from societies in a real sense. Banks and speculators own much land and houses right now, which they are holding off the market to raise prices; fish such as bluefin tuna are fished at above maintainence rates to make short term profits; every year there are fewer trees than the year before; fears about peak extraction rates of oil and a host of other minerals abound, and regardless extracting them often causes great damage to the surrounding areas. Even if it’s granted that taxes are always bad, these are economically better sources of tax revenue than income.
A tax on bluefin tuna would discourage eating it, and allow stocks to recover. A tax on land would make it a liability for banks or other investors to hold on to properties they’re not using, possibly opening up land for homesteading but at least putting those properties on the market, which would lower the price of housing. A tax on minerals and petroleum would create a huge demand for inovation - for how to get the same results with less energy or material input, which would also reduce the collateral damage of extraction - and reduce many of the justifications for aggressive and expensive wars. A tax on lumber could reverse deforestation, so the world gets greener every year.
These taxes would have to be accompanied by tarrifs, so that if lumber is taxed at ten cents a unit in the U.S. and one cent a unit in Brazil, a nine cent tarrif would have to be levied on Brazilian lumber. This in turn would help relocalize jobs, because companies would have a double incentive to hire American workers; there is no tax on their labor, and there is less benefit in doing business in a foreign nation because it allows unchecked environmental damage.
Yes, the tax burden is way too high, period. But taxes cause varying degrees of harm and some even help in some ways. An income tax causes unemployment, which in turn requires the collection of yet more taxes for unemployment insurance, which is yet another tax on labor. A tax on idle housing property forces all such property to come to market, which drops the price of land and housing, reducing the need to government-built low income housing projects - which in turn can mean reduced government spending. Our problem isn’t just the level of taxes, but where they’re being placed.
So who benefits from the system we have? Some say the government, which is true to a degree - by creating problems the government creates justification for its expansion. But government workers aren’t making huge dividends through capital gains - the super rich are. The system we have is a result of the market turning against itself, or the wealthiest turning against the market and influencing government to benefit themselves to the detriment of almost everyone else. Reform is nearly impossible, because the super-rich have such influence in government. Overthrowing the government is silly, because these people can easily afford to buy the next one, and would probably buy up stock in the movement to overthrow the government if it gained any steam. Only political power in the hands of individuals, in reality and not mythically through ‘representation,’ has any real hope.