Opinion: The perfect tax (other than zero) Part I

Opinion: The perfect tax (other than zero) Part I

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Opinion: The perfect tax (other than zero) Part I

Tax systems are under scrutiny in many Western countries. Taxpayers complain because tax pressure is high and governments squander their money. Moreover, they deplore the system’s complexity and lack of transparency. For example, nobody really knows what share of the revenue goes to finance the goods and services produced by government agencies, and how much is used to provide relief to low-income residents. General principles are also being reconsidered. For example, the increasing recourse to wealth taxes is prompting people to wonder why past savings should be taxed twice – once when they are earned (income taxes), and again when they have been saved and become wealth. Taxing income on top of consumption also smacks of double taxation.

Taxation is bad for the economy, since governments are inefficient suppliers of goods and services, especially when they enjoy privileges and can bar entry or prevent privately owned newcomers from competing on equal terms (for example, in the health and education industries). In a word, taxation is a burden on growth and people resent it. It is high time the Western economies reform their tax systems, make governments more accountable, and inform taxpayers about how big a bite the taxman takes from their purchasing power. Numerous proposals are already circulating, and the impending tax reform promised by President Donald Trump’s administration in the United States presents an opportunity to make progress in this direction.

 

See Part II

See Part III

Enrico Colombatto
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