The philosophy of Income Tax


at-1
#1
Hello everyone. I'd like to explore the fundamentals of income tax and then, once I get a handle on the basics, I'd like to have a philosophical/political discussion about what would be ideal. I just graduated from highschool in a small hick town, so please have patience.

Wikipedia says:
Quote:

Income tax is a tax levied on the financial income of persons, corporations, or other legal entities. Various income tax systems exist, with varying degrees of tax incidence.

Ok, so what is 'tax incidence'?

Wikipedia says:
Quote:

Tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare.

Is it just me, or is the above description of 'tax incidence' in wikipedia ridiculously impenetrable in meaning?
The first thing they say is that Tax incidence is an analysis of an effect.
That being said, lets go back a few steps:
Quote:

Various income tax systems exist, with varying degrees of tax incidence.

Various income tax systems exist with varying degrees of analysis of the effect?
Quote:

Tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare.

What do they mean by, 'the distruction of economic welfare'?
 
Dexter Sinister
No Party Affiliation
#2
Yes, jargon like that is often pretty impenetrable. Think of 'tax incidence' as who the tax falls on and how hard it hits them. If I'm earning $100K a year, for instance (I wish...), a 30% income tax leaves me with $70K. If you're earning $30K a year, a 30% income tax leaves you with $21K a year, so I'm both relatively and absolutely in much better financial shape than you are. Or to use the same silly jargon, the tax incidence is heavier on you than it is on me because it lowers your economic welfare much more than it does mine. That's an example of the distribution of economic welfare between the two of us, and all that's really about is who's got how much.

No doubt an economist could come along and shoot that description full of holes, but if you want a jargon-free answer, don't consult an economist.
 
gopher
No Party Affiliation
#3
What "philosophy"???
 
eh1eh
#4
Quote: Originally Posted by gopher View Post

What "philosophy"???

It's based on the "Mo' Money Principle".
 
at-1
#5
Quote: Originally Posted by u

What do they mean by, 'the distruction of economic welfare'?

oops, a freudian slip there....
I meant'the distribution of economic welfare'

I'll reply to your posts soon...
 

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