Why income taxes can never be fair or workable

Despite thousands of tweaks to income tax codes, it has proved impossible to define income without providing room for evasion. Efforts to close loopholes have simply led to ever more detailed and arbitrary provisions. There is in practice no clear, delineating line between business expense and private expense. In terms of morality, there is even less dividing the two. Under the natural law a person has as much right to spend his money on personal, religious, charitable purposes as he does on business. There is no moral justification for the government to seize some of his money and not the rest.

The cost of assessment and collection

The cost of collecting income taxes adds up to a grievously high percentage of GDP. Promising young men and women, who should be training as engineers, software programmers, architects, chemists and doctors, instead become accountants and lawyers. Employees who could easily make more money and contribute more wealth to the economy by working for themselves are intimidated by the paperwork into working for others and earning far less. Every year millions of small businesses fail due to the administrative and emotional overhead of complying with income tax and payroll tax obligations. Bureaucrats plague the people with audits, intrusions, arbitrariness and poor communication. Each year trillions of man-hours are wasted preparing tax returns instead of working out ways to provide better products and services. The opportunity cost to humanity is grievous.

This article is an extract from the book ‘Principles of Good Government’ by Matthew Bransgrove